From Stress to Costress: Stress Testing Interconnected Banking Systems

February 1, 2012

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Format: Chicago

Rodolfo Maino, and Kalin I Tintchev. From Stress to Costress: Stress Testing Interconnected Banking Systems, (USA: International Monetary Fund, 2012) accessed November 24, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents an integrated framework for assessing systemic risk. The framework models banks’ capital asset ratios as a function of future losses and credit growth using a generalized method of moments to calibrate shocks to credit quality and credit growth. The analysis is complemented by a simple measure of systemic risk, which captures tail risk comovement among banks in the system. The main contribution of this paper is to advance a simple framework to integrate systemic risk scenarios that assess the impact of aggregate and idiosyncratic factors. The analysis is based on CreditRisk+, which uses analytical techniques—similar to those applied in the insurance industry - to estimate banks’ credit portfolio loss distributions, making no assumptions about the cause of default.

Subject: Banking, Credit, Credit risk, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Money, Nonperforming loans, Stress testing, Systemic risk

Keywords: Credit, Credit growth, Credit loss, Credit quality, Credit Risk, Global, Interest rate, Marginal contribution to systemic risk, Nonperforming loans, NPL ratio, Portfolio loss distribution, Risk weighted assets, Stress Testing, Systemic Risk, Vars conditional, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/053
Stock No:

WPIEA2012053
ISBN:

9781475502220
ISSN:

1018-5941

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