ECB finds gaps in geopolitical stress-testing frameworks
Current methods fail to properly capture impact of geopolitical stress on liquidity
The European Central Bank’s first ever geopolitical reverse stress test has sparked a debate over whether eurozone lenders are correctly modelling liquidity and funding risks.
“The reverse stress test revealed that solvency-liquidity interactions generally are not well-captured in many banks’ stress-testing frameworks. This is an area where further improvements are needed,” the ECB wrote in a July
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