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The Exposure of Swiss Banks to Macroeconomic Shocks - an Empirical Investigation

Author

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  • Hansjörg Lehmann
  • Michael Manz

Abstract

Assessing financial stability is an issue of rapidly growing importance to central banks and banking authorities. This paper explores an extensive panel data set of Swiss banks to identify macroeconomic influencing factors on bank profitability and to quantify their impact on bank capitalization. We find evidence of a significant effect of various macroeconomic variables as e.g. real growth or interest rate shocks on bank earnings. However, our results suggest that the Swiss banking system is quite robust against macroeconomic shocks. Only a joint occurrence of a recession, rising interest rates and falling stock prices would lead to substantial losses in the Swiss banking industry.

Suggested Citation

  • Hansjörg Lehmann & Michael Manz, 2006. "The Exposure of Swiss Banks to Macroeconomic Shocks - an Empirical Investigation," Working Papers 2006-04, Swiss National Bank.
  • Handle: RePEc:snb:snbwpa:2006-04
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    File URL: https://www.snb.ch/n/mmr/reference/working_paper_2006_04/source/working_paper_2006_04.n.pdf
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    Citations

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    Cited by:

    1. Patrick Van Roy & Stijn Ferrari & Cristina Vespro, 2018. "Sensitivity of credit risk stress test results: Modelling issues with an application to Belgium," Working Paper Research 338, National Bank of Belgium.
    2. Schechtman, Ricardo & Gaglianone, Wagner Piazza, 2012. "Macro stress testing of credit risk focused on the tails," Journal of Financial Stability, Elsevier, vol. 8(3), pages 174-192.
    3. repec:mbr:jmonec:v:6:y:2012:i:3:p:163-189 is not listed on IDEAS
    4. Coffinet, J. & Lin, S. & Martin, C., 2009. "Stress testing French banks' income subcomponents," Working papers 242, Banque de France.
    5. Busch, Ramona & Koziol, Philipp & Mitrovic, Marc, 2015. "Many a little makes a mickle: Macro portfolio stress test for small and medium-sized German banks," Discussion Papers 23/2015, Deutsche Bundesbank.
    6. Albert, Stéphane, 2015. "US bank holding companies: Structure of activities and performance through the cycles," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 253-269.
    7. repec:eee:quaeco:v:68:y:2018:i:c:p:237-253 is not listed on IDEAS

    More about this item

    Keywords

    banking; macroeconomic shocks; stress tests; credit risk; interest rate risk; Switzerland;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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