Stress Testing
First published:
ISBN: 9781782720089
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Stress Testing of Bank Loan Portfolios as a Diagnostic Tool
Paul Calem and Arden Hall
Introduction to Stress Testing: Approaches, Methods and Applications
Governance over Stress Testing
Stress Testing and Other Risk-Management Tools
Stress Testing for Market Risk
The Evolution of Stress Testing Counterparty Exposures
Operational Risk: An Overview of Stress-Testing Methodologies
Stress Testing of Bank Loan Portfolios as a Diagnostic Tool
Stress-Test Modelling for Loan Losses and Reserves
A Framework for Stress Testing Banks’ Corporate Credit Portfolio
EU-Wide Stress Test: The Experience of the EBA
Stress Testing Across International Exposures and Activities
Liquidity Risk: The Case of the Brazilian Banking System
Determining the Severity of Macroeconomic Stress Scenarios
In the aftermath of the financial crisis and its attendant government interventions to stabilise financial markets, stress testing of bank capital adequacy has taken on a prominent role in monitoring risk and capital adequacy at large banking organisations.11 For additional historical perspective, see the speech “Developing Tools for Dynamic Capital Supervision” by Federal Reserve Governor Daniel K. Tarullo at the Federal Reserve Bank of Chicago Annual Risk Conference, April 10, 2012. The stress tests are designed to provide a comprehensive view of bank risk exposure, including exposure to balance-sheet loan losses; revenue declines; counterparty credit risk; trading and market risk; and operational risk.
In February 2009, the federal banking agencies – led by the Federal Reserve – created a stress test and required the nation’s 19 largest bank holding companies to apply it as part of the Supervisory Capital Assessment Program (SCAP).22 The test involved two scenarios – one based on the consensus forecast of professional forecasters and the other based on a severe, but plausible, economic situation – with specified macroeconomic variables such as GDP growth, employment and house
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