Stress Testing (2nd Edition)
First published:
ISBN: 978-1-78272-391-2
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The Asset Market Effects of Bank Stress-test Disclosures
Li Gu, Ke Wang and Jin Wu
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
On May 7, 2009, the Federal Reserve publicly released the results from the first supervisory stress test, known as Supervisory Capital Assessment Program (SCAP). These bank-specific results marked a significant departure from the standard practice of keeping bank exam information confidential. The next supervisory stress test in US was conducted for the same group of 19 bank holding companies (BHCs) in 2011, under the name of the Comprehensive Capital Analysis and Review (CCAR). However, this time the Fed only announced the completion of CCAR but did not disclose any firm-specific results. From 2012, CCAR became an annual practice and the Fed began to regularly disclose stress-testing results for individual BHCs. In 2013, Dodd–Frank Act Stress Testing (DFAST) results were added to announcements, and released about one week earlier than the CCAR results.11 DFAST and CCAR results are based on the same stressed scenarios and banks’ risk exposures, with different assumptions about banks’ capital distribution plans and balance growth. For detailed comparisons on the methodology of DFAST and CCAR, see Board of Governors of the Federal Reserve System, 2013b (available at https://www
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