Stressing to Breaking Point: Interpreting Stress Test Results

Author/Editor:

Rupert D Worrell

Publication Date:

June 1, 2008

Electronic Access:

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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 illustrates how stress tests of banking systems may be designed to evaluate banks' reaction to shocks of increasing intensity, up to the point where regulatory norms are breached, or banks become insolvent. This approach offers useful insight and guidance for regulatory policy and intervention, using existing methodology and data. The illustrations presented in this paper are a small sample of the wide variety of shocks, scenarios, and assumptions to which this approach may be applied.

Series:

Working Paper No. 2008/148

Subject:

Banking Capital adequacy requirements Commercial banks Credit Nonperforming loans

English

Publication Date:

June 1, 2008

ISBN/ISSN:

9781451870060/1018-5941

Stock No:

WPIEA2008148

Pages:

18

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