Stress-testing

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Macrofinancial Stress Testing - Principles and Practices

IMF paper on seven best practices for stress testing

International Monetary Fund paper proposes seven "best practices" principles for stress testing: i) define the institutional perimeter for the tests; ii) identify all relevant channels of risk propagation; iii) include all material risks and buffers; iv) make use of the investors' viewpoint in design of stress tests; v) focus on all risks; vi) when communicating stress test results, speak smarter, not just louder; and vii) beware of the "black swan". While principles focus mainly on stress tests conducted for macrofinancial surveillance purposes, they also apply to stress tests undertaken for other purposes, such as microprudential oversight and institution-specific assessment.

Publisher: International Organizations Release date: Aug 2012

Type: Consultative, discussion and issues paper

Topics: Stress-testing, Crisis management and contingency planning, Macroprudential

Sectors: Banking

Financial Stability: Measurement and Policy

ECB speech about macroprudential research and current stage of financial stability analysis at the ECB

European Central Bank speech. Provides overview of recent macroprudential research. Discusses some main analytical tools for financial stability analysis at the ECB. Refers to set of macro-prudential policy instruments embedded in the EU Capital Requirements Directive (CRD) IV, and how these instruments should be made compatible with the requirements for both safeguarding financial stability and further developing the Single Market for financial services.

Publisher: Regional Standard-Setting Bodies Release date: Jun 2012

Type: Consultative, discussion and issues paper

Parent: Capital Requirements Directive - CRD IV

Topics: Macroprudential, Systemic risk, Stress-testing

Sectors: Banking

HKMA Supervisory Policy - Stress-Testing

HKMA policy on its proportionate supervisory approach to stress-testing by banks

Hong Kong Monetary Authority policy sets out key elements of an effective stress-testing program and describes its supervisory approach to assessing the adequacy of bank stress-testing practices. HKMA uses a proportionate approach when assessing stress-testing programs. Small and less complex banks should utilize qualitative assessments to complement simple sensitivity and scenario analyses of specific risk types to which they are most exposed. Large and complex banks should undertake more extensive and sophisticated stress tests.

Publisher: National Regulators Release date: May 2012 Country: Hong Kong, China

Type: Law, Regulation and Policy

Peer: HKMA Supervisory Policy - General Risk Management Controls, HKMA Supervisory Policy - Supervisory Review Process, HKMA Supervisory Policy - General Principles of Credit Risk Management

Topics: Stress-testing, Risk management

Sectors: Banking

Peer Review of Supervisory Authorities' Implementation of Stress Testing Principles

BCBS report summarizing how supervisory authorities have implemented the Committee’s 2009 Principles for sound stress testing practices and supervision

Basel Committee on Banking Supervision report finds stress testing has become a key component of supervisory assessment process and a tool for contingency planning and communication. Countries are at varying stages in implementing the principles and further work remains. BCBS will continue to monitor implementation of the principles and determine whether additional guidance is necessary.

Publisher: Global Standard-Setting Bodies Release date: Mar 2012

Type: Consultative, discussion and issues paper

Parent: Principles for Sound Stress Testing Practices and Supervision

Peer: Supervisory and Bank Stress Testing: Range of Practices , Bank Stress Testing Principles

Topics: Stress-testing

Sectors: Banking

Stress-Testing Macro Stress Testing: Does It Live Up to Expectations?

BIS working paper assessing strengths and weaknesses of macro stress testing

Bank for International Settlements working paper reviewing state of the art in macro stress testing, and assessing its strengths and weaknesses. Argues that, given current technology, macro stress tests are ill-suited as early warning devices, i.e. as tools for identifying vulnerabilities during seemingly tranquil times and for triggering remedial action. By contrast, as long as properly designed, stress tests can be quite effective as crisis management and resolution tools. Identifies additional side benefits, stemming largely from the way such tests can discipline thinking about financial stability and suggests ways to improve their performance.

Publisher: International Organizations Release date: Dec 2011

Type: Consultative, discussion and issues paper

Topics: Stress-testing, Macroprudential, Crisis management and contingency planning

Sectors: Banking

Guidelines on Stress Testing

EBA guidelines on supervisory expectations for stress testing governance and infrastructure and use of stress testing as a risk management tool

European Banking Authority guidelines to assist institutions in understanding supervisory expectations of appropriate stress testing governance and infrastructure. Covers use of stress testing as a risk management tool. Provides high level guidance on how stress test could be conducted by institutions and assessed by supervisors, including concerning desirable features relating to scope, calibration, frequency, documentation or risks covered.

Publisher: Regional Standard-Setting Bodies Release date: Aug 2010

Type: Guideline

Topics: Stress-testing, Risk management

Sectors: Banking

Guideline - Stress Testing

OSFI's expectations for stress testing by banks and insurance companies

Office of the Superintendent of Financial Institutions guideline sets out OSFI’s expectations for stress testing by regulated institutions. Applies to banks, trust and loan companies, cooperative credit associations, life insurance companies, property and casualty insurance companies and insurance holding companies. Stress testing is be imbedded in enterprise wide risk management. Should serve the purposes of: i) risk identification and control; ii) providing complementary risk perspective to other risk management tools; iii) supporting capital management; and iv) improving liquidity management. Addresses the role of the board and senior management.

Publisher: National Regulators Release date: Nov 2009 Country: Canada

Type: Guideline

Topics: Stress-testing, Risk management

Sectors: Banking, Insurance

Macroprudential Supervision of Financial Institutions: Lessons from the SCAP

FRBNY paper discussing key features of bank stress test and how they can be leveraged to improve bank supervision in the future

Federal Reserve Bank of New York report advocating a macroprudential perspective for regulatory reform in the US. Discusses Supervisory Capital Assessment Program (SCAP), or bank “stress test,” as showing how macro- and microprudential perspectives can be joined to create a stronger supervisory framework that addresses a wider range of supervisory objectives. Reviews key features of SCAP and how they can be levered to improve bank supervision in future.

Publisher: National Regulators Release date: Oct 2009

Type: Consultative, discussion and issues paper

Topics: Macroprudential, Stress-testing

Sectors: Banking

Principles for Sound Stress Testing Practices and Supervision

BCBS guidelines aimed at deepening and strengthening banks’ stress testing practices and supervisory assessment of these practices

Basel Committee on Banking Supervision guidance sets out a comprehensive set of principles for sound governance, design and implementation of stress testing programmes at banks. Principles address weaknesses in such programmes that were highlighted by the financial crisis. Stress testing also is a key component of supervisory assessment process that assists supervisors in identifying vulnerabilities and evaluate banks' capital adequacy. Principles establish expectations for role and responsibilities of supervisors when evaluating firms' stress testing practices

Publisher: Global Standard-Setting Bodies Release date: May 2009

Type: Guideline

Peer: Peer Review of Supervisory Authorities' Implementation of Stress Testing Principles, Bank Stress Testing Principles , Supervisory and Bank Stress Testing: Range of Practices

Topics: Stress-testing

Sectors: Banking

Principles for Sound Liquidity Risk Management and Supervision

BCBS updated guidance for managing and supervising liquidity risk

Update of Basel Committee on Banking Supervision's 2000 guidance on Sound Practices for Managing Liquidity in Banks. Includes new supervisory emphasis on: i) establishing a liquidity risk tolerance; ii) maintaining an adequate level of liquidity, including a cushion of liquid assets; iii) allocating liquidity costs, benefits and risks to all significant business activities; iv) identifying and measuring the full range of liquidity risks, including contingent risks; v) designing and using severe stress test scenarios; vi) developing operational contingency funding plans; vii) managing intraday liquidity risk and collateral; viii) and public disclosure requirements.

Publisher: Global Standard-Setting Bodies Release date: Aug 2008

Type: Guideline

Peer: Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools, Net Stable Funding Ratio Disclosure Standards

Topics: Liquidity risk and rules, Stress-testing, Risk management

Sectors: Banking

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Resources

382 records

Macrofinancial Stress Testing - Principles and Practices

Financial Stability: Measurement and Policy

HKMA Supervisory Policy - Stress-Testing

Peer Review of Supervisory Authorities' Implementation of Stress Testing Principles

Stress-Testing Macro Stress Testing: Does It Live Up to Expectations?

Guidelines on Stress Testing

Guideline - Stress Testing

Macroprudential Supervision of Financial Institutions: Lessons from the SCAP

Principles for Sound Stress Testing Practices and Supervision

Principles for Sound Liquidity Risk Management and Supervision

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