Macroprudential Liquidity Stress Tests

Stefan W Schmitz

This chapter focuses on macroprudential liquidity stress tests that aim to capture the liquidity situation of an entire banking system under business as usual and under stress.6868This chapter builds on Schmitz (2009, 2014). The objectives, challenges and instruments to overcome such stresses can differ from those presented in Chapter 7, which dealt with microprudential stress tests. The chapter provides an outline for the successful implementation of macroprudential liquidity stress tests. As complementary reading we suggest Aikman et al (2009), Basel Committee on Banking Supervision (2013a,b, 2015), Demekas (2015), Schmieder et al (2012) and Chapter 11 of this book.

This chapter is structured along the following lines. First, we discuss what distinguishes the macroprudential from the microprudential variant. Then we examine the former’s main challenges. The data requirements and the framework are described next, followed by the design and calibration of macroprudential liquidity stress tests. Use of the results is then discussed. Macroprudential liquidity stress tests are an area of lively conceptual debate. The main challenges ahead are discussed in the penultimate section

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