Rules of Thumb for Bank Solvency Stress Testing

November 11, 2013

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Format: Chicago

Daniel C Hardy, and Christian Schmieder. Rules of Thumb for Bank Solvency Stress Testing, (USA: International Monetary Fund, 2013) accessed December 21, 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

Rules of thumb can be useful in undertaking quick, robust, and readily interpretable bank stress tests. Such rules of thumb are proposed for the behavior of banks’ capital ratios and key drivers thereof—primarily credit losses, income, credit growth, and risk weights—in advanced and emerging economies, under more or less severe stress conditions. The proposed rules imply disproportionate responses to large shocks, and can be used to quantify the cyclical behaviour of capital ratios under various regulatory approaches.

Subject: Banking, Capital adequacy requirements, Credit, Credit ratings, Financial regulation and supervision, Financial sector policy and analysis, Money, National accounts, Personal income, Stress testing

Keywords: A. bank characteristic, AC bank, Asia and Pacific, Bank capitalization, Bank management, Bank solvency, Bank solvency stress tests, Bank stability, Capital adequacy requirements, Central and Eastern Europe, Credit, Credit ratings, Customer loan, Default rate, EC bank, Europe, Global, Growth rate, IRB bank, Loss rate, Net income, Operating expenses, Personal income, Profit and loss account, Rules of thumb, Stress testing, Western Europe, WP

Publication Details

Pages:

67
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/232
Stock No:

WPIEA2013232
ISBN:

9781475518115
ISSN:

1018-5941

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