Stress Testing (2nd Edition)
First published:
ISBN: 978-1-78272-391-2
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Introduction
Introduction
Foreword
Introduction
Response to Financial Crises: The Development of Stress Testing over Time
Stress Testing and Other Risk Management Tools
Econometric Pitfalls in Stress Testing
Stress-testing applications of Machine Learning Models
Four Years of Concurrent Stress Testing at the Bank of England: Developing the Macroprudential Perspective
Stress Testing for Market Risk
The Evolution of Stress Testing Counterparty Exposures
Liquidity Risk: The Case of the Brazilian Banking System
Operational Risk: An Overview of Stress-testing Methodologies
Peacetime Stress Testing: A Proposal
Stress-test Modelling for Loan Losses and Reserves
A New Framework for Stress Testing Banks’ Corporate Credit Portfolio
EU-wide Stress Test: The Experience of the EBA
Stress Testing Across International Exposures and Activities
The Asset Market Effects of Bank Stress-test Disclosures
An Alternative Approach to Stress Testing a Bank’s Trading Book
Determining the Severity of Macroeconomic Stress Scenarios
Governance over Stress Testing
This book presents various stress-testing methodologies and approaches. While most of the contributors are at regulatory agencies or were in the past, the views in the chapters do not establish supervisory policy, requirements, or expectations. Instead, the information presented here should be useful for those who choose to conduct stress tests, such as modellers at financial institutions, as well as for regulatory authorities or equity analysts.
Since the first edition of this book was published, there have been significant improvements in stress testing for financial institutions. This was put succinctly by Andrea Enria, head of the Single Supervisory Mechanism (SSM) of the European Central Bank and former head of the European Banking Authority (EBA), in a speech in 2018 where he discussed the evolution of stress tests in the European Union (EU):11 Speech by Andrea Enria, “What we have Learnt from EU-wide Stress Tests”, National Bank of Romania, November 15, 2018.
The stress-test exercise was originally introduced in the EU as a crisis management tool in 2011. It has gradually turned into a regular and flexible tool for competent authorities to identify banks’ weaknesses
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