Stress testing
Rush to meet net-zero target could see Sonia, SOFR collapse
Policy inaction could halt benchmarks’ normalisation, BoE biennial exploratory scenario finds
Goldman banker calls for greater CCAR flexibility
Exec says share buybacks should have been permitted for stronger lenders during Covid freeze
How time-step stress-testing helped Deutsche navigate Covid
Market risk chief touts importance of repeat stress-testing over point-in-time methods
A bold step forward in climate-related financial risk supervision
Banque de France’s Denis Beau explains the results of a pilot exercise, and what comes next
Basel playing catch-up on climate risk, say experts
Individual regulators have already gone further in encouraging transition
Dividend freeze helped keep lid on bank CDS spreads – BIS
But the ban on distributions wrecked bank share prices
Climate shocks could cut ‘polluting’ EU funds’ value by 20%
Esma researchers say carbon-intensive funds also pose more of a systemic risk
Euro banks’ trading activities pose lopsided risk to capital – ECB
Elevated downside risks to capital posed by net trading income
UK seeks to take the lead on climate risk standards
New research centre intended to help UK financial firms build better climate risk models
In light of Covid recession, Fed eases stress test scenario
Real GDP projected to fall 4%. In 2020, the simulated drop was 8.5%
EBA stress test to gird banks for long Covid depression
Real GDP projected to fall -12.9% from baseline by 2023
BoE to test UK banks against double-dip Covid recession
Stress simulation falls short of actual coronavirus crisis shock to the UK economy
BofA doubled held-to-maturity book in 2020
The bank moved mortgage bonds into HTM throughout the year
Fed stress tests find critics on all sides
Conflicting results fuel arguments over dividends and buybacks
US banks fear Q1 stress capital buffer reset
Fed left buffers on hold after latest stress test, but can change them until March 31, 2021
Regional banks, FBOs found second round of Fed tests tougher
DB, HSBC, PNC, US Bancorp and TD Group saw their peak-to-trough CET1 ratio depletion increase most
Fed’s Covid stress tests strain top banks’ leverage ratios
Citi, Goldman, JP Morgan, Morgan Stanley all had projected post-stress SLRs below 5%
Modeling loss given default regressions
The authors investigate the puzzle in the literature that various parametric loss given default (LGD) statistical models perform similarly, by comparing their performance in a simulation framework.
FSB offers loud warning and muted response on climate risk
Global regulators say risks are near-term and cross-border, but propose only data collection
Covid-19 overwhelmed stress-testing models – banks
Risk USA: lenders forced to apply management overlays to models skewed by macro inputs
Stress testing household debt
The authors estimate a county-level model of household delinquency and use it to conduct “stress tests” of household debt.
Regions deploys early-warning tool for credit risk
Risk USA: system alerted US superregional to impending defaults during Covid crisis
BoE warns banks: start preparing for a higher carbon price
Risk Live: stress tests should assume rising carbon price, regardless of government policy, says Breeden
Top US-based foreign banks shrink systemic footprints
US units of Barclays, Credit Suisse and Deutsche Bank have cut assets 40% since Q3 2016