Reverse Stress Testing In Banking

Author : Michael Eichhorn,Tiziano Bellini,Daniel Mayenberger
Publisher : Walter de Gruyter GmbH & Co KG
Page : 583 pages
File Size : 55,9 Mb
Release : 2021-05-10
Category : Business & Economics
ISBN : 9783110647907

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Reverse Stress Testing in Banking by Michael Eichhorn,Tiziano Bellini,Daniel Mayenberger Pdf

Reverse stress testing was introduced in risk management as a regulatory tool for financial institutions more than a decade ago. The recent Covid-19 crisis illustrates its relevance and highlights the need for a systematic re-thinking of tail risks in the banking sector. This book addresses the need for practical guidance describing the entire reverse stress testing process. Reverse Stress Testing in Banking features contributions from a diverse range of established practitioners and academics. Organized in six parts, the book presents a series of contributions providing an in-depth understanding of: Regulatory requirements and ways to address them Quantitative and qualitative approaches to apply reverse stress testing at different levels – from investment portfolios and individual banks to the entire banking system The use of artificial intelligence, machine learning and quantum computing to gain insights into and address banks’ structural weaknesses Opportunities to co-integrate reverse stress testing with recovery and resolution planning Governance and processes for board members and C-suite executives Readers will benefit from the case studies, use cases from practitioners, discussion questions, recommendations and innovative practices provided in this insightful and pioneering book.

Author : Tiziano Bellini
Publisher : Academic Press
Page : 316 pages
File Size : 42,9 Mb
Release : 2016-11-26
Category : Business & Economics
ISBN : 9780128036112

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Stress Testing and Risk Integration in Banks by Tiziano Bellini Pdf

Stress Testing and Risk Integration in Banks provides a comprehensive view of the risk management activity by means of the stress testing process. An introduction to multivariate time series modeling paves the way to scenario analysis in order to assess a bank resilience against adverse macroeconomic conditions. Assets and liabilities are jointly studied to highlight the key issues that a risk manager needs to face. A multi-national bank prototype is used all over the book for diving into market, credit, and operational stress testing. Interest rate, liquidity and other major risks are also studied together with the former to outline how to implement a fully integrated risk management toolkit. Examples, business cases, and exercises worked in Matlab and R facilitate readers to develop their own models and methodologies. Provides a rigorous statistical framework for modeling stress test in line with U.S. Federal Reserve FRB CCAR (Comprehensive Capital Analysis Review), U.K. PRA (Prudential Regulatory Authority), EBA (European Baning Authorithy) and comply with Basel Accord requirements Follows an integrated bottom-up approach central in the most advanced risk modelling practice Provides numerous sample codes in Matlab and R

Author : Mr.Tobias Adrian,Mr.James Morsink,MissLiliana B Schumacher
Publisher : International Monetary Fund
Page : 73 pages
File Size : 50,5 Mb
Release : 2020-02-05
Category : Business & Economics
ISBN : 9781513520742

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Stress Testing at the IMF by Mr.Tobias Adrian,Mr.James Morsink,MissLiliana B Schumacher Pdf

This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.

Author : Mindaugas Leika,Hector Perez-Saiz,Ms.Olga Ilinichna Stankova,Torsten Wezel
Publisher : International Monetary Fund
Page : 58 pages
File Size : 44,6 Mb
Release : 2020-05-11
Category : Business & Economics
ISBN : 9781513532912

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Stress Testing in Sub-Saharan Africa by Mindaugas Leika,Hector Perez-Saiz,Ms.Olga Ilinichna Stankova,Torsten Wezel Pdf

The paper finds that supervisory stress tests are conducted in more than half of sub-Saharan African countries, particularly in western and southern Africa, and that the number of individual stress tests has grown exponentially since the early 2010s. By contrast, few central banks publish assessments of macro-financial linkages; the focus leans more toward discussing trends and weaknesses within the financial sector than on outside risks that may negatively affect its performance.

Author : Assad Bouayoun
Publisher : Wiley
Page : 220 pages
File Size : 49,9 Mb
Release : 2021-03-08
Category : Business & Economics
ISBN : 1119621054

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Quantitative Reverse Stress Testing by Assad Bouayoun Pdf

A practioner’s guide to quantitative reverse stress testing, featuring advanced solutions for better management of financial risks Whether you manage a portfolio, a business unit or a bank, you must ensure that a sudden shock in the markets won’t drive you out of business because of a large loss, a jump in capital utilisation or an increase in funding consumption . In financial risk management, reverse stress testing is the attempt to identify worst case scenarios causing maximum financial loss. Traditional stress testing methods have failed to avert the last financial crisis or highlight financial distress. . Every so often some regulators and risk managers specify stress scenarios with simplifications that create a false sense of safety. To avoid a combinatorial explosion, a number of arbitrary choices are usually made in relation to the level of each shock, their combination and the time horizon. These assumptions, although necessary, limit the effectiveness of this technique. Quantitative Reverse Stress Testing: Hunting for the Black Swan offers a more natural approach to identifying the realistic scenario provoking the largest losses. It also provides a means to understand the impact of extreme events and how to mitigate them while introducing technological advances and the adapted mathematical tools that have made it possible to solve this type of quantitative finance problems. You’ll see how mitigation strategies can be more accurate and better targeted, reducing risk, cost of funding and regulatory capital. With this book, you’ll have access to a comprehensive guide to crucial aspects of reverse stress testing. · Get an introduction to a rigorous mathematical framework to quantitative reverse stress testing · Consider different heuristics, one of them based on annealing, to solve theoptimisation problem · Review solution implementation, system infrastructure design and integration into the financial risk management of a firm · Read related case studies from a variety of industries If it’s time to move your approach to reverse stress testing forward, this guide offers real solutions tooptimisation and cost issues. Get a guide that supports a more informed approach to testing and financial risk management as it helps to protect vital business interests.

Author : Moorad Choudhry
Publisher : John Wiley & Sons
Page : 868 pages
File Size : 54,7 Mb
Release : 2022-09-22
Category : Business & Economics
ISBN : 9781119755685

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The Principles of Banking by Moorad Choudhry Pdf

A timely and robust discussion of responsible bank stewardship and practice. The Second Edition of The Principles of Banking offers banking professionals, regulators, and students from a variety of backgrounds an authoritative and practical discussion of the foundations of modern banking and good banking practice. In the book, you'll find a comprehensive roadmap to a more sustainable business model for your banking organization. The author draws on his many years' experience as a commercial and investment banker as he explains the original principles of banking—including sound lending policy, capital management, and liquidity risk management—as well as new material covering the impact of COVID-19 on banks, risk management, and balance sheet management. The Principles of Banking also provides recommendations for bank asset-liability management best practices that enable banks to deliver optimized balance sheets for the benefit of all stakeholders. It also includes new chapters in market risk management, foreign exchange risk management, interest rate risk, and credit risk policy and management. An essential update to a widely read and taught banking text, The Principles of Banking, Second Edition is an indispensable resource for banking professionals and students everywhere.

Author : Ms.Li L. Ong,Mr.Rodolfo Maino,Ms.Nombulelo Duma
Publisher : International Monetary Fund
Page : 24 pages
File Size : 42,5 Mb
Release : 2010-12-01
Category : Business & Economics
ISBN : 9781455210893

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Into the Great Unknown by Ms.Li L. Ong,Mr.Rodolfo Maino,Ms.Nombulelo Duma Pdf

Stress testing has become the risk management tool du jour in the wake of the global financial crisis. In countries where the information reported by financial institutions is considered to be of sufficiently good quality, and supervisory and regulatory standards are high, stress tests can be of significant value. In contrast, the proliferation of stress testing in underdeveloped financial systems with weak oversight regimes is fraught with uncertainties, as it is unclear what the results actually represent and how they could be usefully applied. In this paper, problems associated with stress tests using weak data are examined. We offer a potentially more useful alternative, the "breaking point" method, which also requires close coordination with on-site supervision and complemented by other supervisory tools and qualitative information. Excel spreadsheet templates of the stress tests presented in this paper are provided.

Author : Mr. Andreas A. Jobst,Nobuyasu Sugimoto,Timo Broszeit
Publisher : International Monetary Fund
Page : 84 pages
File Size : 46,8 Mb
Release : 2014-07-22
Category : Business & Economics
ISBN : 9781498324557

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Macroprudential Solvency Stress Testing of the Insurance Sector by Mr. Andreas A. Jobst,Nobuyasu Sugimoto,Timo Broszeit Pdf

Over the last decade, stress testing has become a central aspect of the Fund’s bilateral and multilateral surveillance work. Recently, more emphasis has also been placed on the role of insurance for financial stability analysis. This paper reviews the current state of system-wide solvency stress tests for insurance based on a comparative review of national practices and the experiences from Fund’s FSAP program with the aim of providing practical guidelines for the coherent and consistent implementation of such exercises. The paper also offers recommendations on improving the current insurance stress testing approaches and presentation of results.

Author : Rama Cont,Artur Kotlicki,Laura Valderrama
Publisher : Unknown
Page : 128 pages
File Size : 51,7 Mb
Release : 2019
Category : Electronic
ISBN : 8283791060

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Liquidity at Risk by Rama Cont,Artur Kotlicki,Laura Valderrama Pdf

The traditional approach to the stress testing of financial institutions focuses on capital adequacy and solvency. Liquidity stress tests are often applied in parallel to solvency stress tests, based on scenarios which may not be consistent with those used in solvency stress tests. We propose a structural framework for the joint stress testing of solvency and liquidity: our approach exploits the mechanisms underlying the solvency-liquidity nexus to derive relations between solvency shocks and liquidity shocks. These relations are then used to model liquidity and solvency risk in a coherent framework, involving external shocks to solvency and endogenous liquidity shocks. We introduce solvency-liquidity diagrams as a method for analysing the resilience of a balance sheet to the resulting combination of solvency shocks and endogenous liquidity shocks. Finally, we define the concept of 'Liquidity at Risk' which quantifies the liquidity resources required for a financial institution facing a stress scenario.

Author : Anonim
Publisher : Lulu.com
Page : 294 pages
File Size : 42,7 Mb
Release : 2004
Category : Bank capital
ISBN : 9789291316694

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International Convergence of Capital Measurement and Capital Standards by Anonim Pdf

Author : Morris Goldstein
Publisher : Columbia University Press
Page : 379 pages
File Size : 42,8 Mb
Release : 2017-05-30
Category : Business & Economics
ISBN : 9780881327069

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Banking's Final Exam by Morris Goldstein Pdf

Spurred by the success of the first stress test of US banks toward the end of the global economic crisis in 2009, stress testing of large financial institutions has become the cornerstone of banking supervision worldwide. The aim of the tests is to determine which banks are adequately capitalized under severe economic shocks and to order corrective measures for those that are vulnerable. In Banking’s Final Exam, one of the world’s leading experts on banking regulation concludes that the tests administered on both sides of the Atlantic suffer from fundamental weaknesses, leading to a false sense of reassurance about the safety and soundness of the banking system. Some weaknesses can be corrected within the existing bank-capital regime, but others will require bold reforms—including higher minimum capital requirements for the largest and most systemically-important banks. The banking industry is likely to resist these reforms, but this book explains why their objections do not hold water.

Author : Muhamed Zulkhibri,Turkhan Ali Abdul Manap,Aishath Muneeza
Publisher : Springer Nature
Page : 201 pages
File Size : 45,5 Mb
Release : 2019-10-01
Category : Business & Economics
ISBN : 9783030240059

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Islamic Monetary Economics and Institutions by Muhamed Zulkhibri,Turkhan Ali Abdul Manap,Aishath Muneeza Pdf

This edited volume explores theoretical and empirical issues related to monetary economics and policy in the Islamic financial system. Derived from the Conference on Islamic Monetary Economics and Institutions: Theory and Practice 2017 held in Malé, Maldives, the enclosed papers highlights several option for authorities and regulatory bodies regarding monetary policy and regulation, as well as discussing how Islamic monetary policy effects growth, financial stability and resilience to shocks in practice. The inter-linkage between Islamic monetary policy and other markets are also explored. The subject of Islamic economics has gained considerable attention in the last four decades with the emergence of Islamic financial institutions around the world. This phenomenon has motivated economists to develop a comprehensive theoretical framework of modern monetary economics for Islamic economic system. An important characteristic of the Islamic economic system is the abolition of interest from the financial system. Islamic monetary economics is distinguished from conventional monetary economics due to the absence of interest. Therefore, under the Islamic economic system, monetary policy has to depend on other tools. In the early theoretical literature on Islamic monetary economics, many have discussed the role of money in Islamic economics system, while the number of empirical studies on Islamic monetary economics is a relatively new phenomenon. According to Islamic scholars, there are three main goals of Islamic monetary policy: a) economic well-being with full employment and optimum rate of economic growth; b) socioeconomic justice and equitable distribution of income and wealth and c) stability in the value of money. Hence, the Islamic monetary policy has several socioeconomic and ethical implications. Featuring regional case studies, this book serves as a valuable resource for academics, scholars, practitioners and policy makers in the areas of Islamic economics and finance.

Author : Mr.Claus Puhr,Mr.Andre Santos,Mr.Christian Schmieder,Salih N. Neftci,Mr.Benjamin Neudorfer,Mr.Stefan W. Schmitz,Mr.Heiko Hesse
Publisher : International Monetary Fund
Page : 63 pages
File Size : 45,5 Mb
Release : 2012-01-01
Category : Business & Economics
ISBN : 9781475502466

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Next Generation System-Wide Liquidity Stress Testing by Mr.Claus Puhr,Mr.Andre Santos,Mr.Christian Schmieder,Salih N. Neftci,Mr.Benjamin Neudorfer,Mr.Stefan W. Schmitz,Mr.Heiko Hesse Pdf

A framework to run system-wide, balance sheet data-based liquidity stress tests is presented. The liquidity framework includes three elements: (a) a module to simulate the impact of bank run scenarios; (b) a module to assess risks arising from maturity transformation and rollover risks, implemented either in a simplified manner or as a fully-fledged cash flow-based approach; and (c) a framework to link liquidity and solvency risks. The framework also allows the simulation of how banks cope with upcoming regulatory changes (Basel III), and accommodates differences in data availability. A case study shows the impact of a "Lehman" type event for stylized banks.

Author : Mr.Jorge A. Chan-Lau
Publisher : International Monetary Fund
Page : 18 pages
File Size : 55,5 Mb
Release : 2013-04-10
Category : Business & Economics
ISBN : 9781484384923

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Market-Based Structural Top-Down Stress Tests of the Banking System by Mr.Jorge A. Chan-Lau Pdf

Despite increased need for top-down stress tests of financial institutions, performing them is challenging owing to the absence of granular information on banks’ trading and loan portfolios. To deal with these data shortcomings, this paper presents a market-based structural top-down stress testing methodology that relies in market-based measures of a bank's probability of default and structural models of default risk to infer the capital losses they could experience in stress scenarios. As an illustration, the methodology is applied to a set of banks in an advanced emerging market economy.

Author : Mr.Matthew T Jones,Mr.Paul Louis Ceriel Hilbers
Publisher : International Monetary Fund
Page : 18 pages
File Size : 50,8 Mb
Release : 2004-09-27
Category : Business & Economics
ISBN : 158906402X

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Stress Testing Financial Systems by Mr.Matthew T Jones,Mr.Paul Louis Ceriel Hilbers Pdf

Stress testing is becoming a widely used tool to assess potential vulnerabilities in a financial system. This booklet is intended to answer some of the basic questions that may arise as part of the process of stress testing. The pamphlet begins with a discussion of stress testing in a financial system context, highlighting some of the differences between stress tests of systems and of individual portfolios. The booklet provides an overview of the process itself, from identifying vulnerabilities, to constructing scenarios, to interpreting the results. The experience of the IMF in conducting stress testing as part of the Financial Sector Assessment Program (FSAP) is also discussed.