Macroprudential Stress-Testing Practices of Central Banks in Central and South Eastern Europe : An Overview and Challenges Ahead

Stress tests are the main practical tools of macroprudential oversight. This paper reviews the stress-testing practices of central banks in Central and South Eastern Europe (CSEECBs) and outlines the challenges in the area of stress testing going forward. The authors discuss good practice and the applied approaches by CSEECBs focusing on the main components of a typical macroprudential stress test, i.e. constructing the baseline and stress scenarios, mapping macroeconomic scenarios and microeconomic factors to risk factors, calculating risk exposures to different risk indicators, and estimating outcome indicators to inform macroprudential policy. The main challenges for the CSEECBs going forward involve needed improvements in data reliability, consideration of quantitative microprudential indicators in macroprudential stress tests, explicit incorporation of dynamics in stress tests to include reaction functions of banks and macroprudential policy, institutionalization of macroprudential policy responses to alarming stress-test results, use of the top-down and bottom-up stress test results in supervisory communication, cooperation of macroprudential and microprudential supervision, and information exchange for better cross-border supervision of international banking groups.

Bibliographic Details

Main Authors:	Melecky, Martin, Podpiera, Anca Maria
Language:	English
Published:	2010-09-01
Subjects:	ACCOUNTING, ADVERSE SHOCKS, ARBITRAGE, ASSET CLASSES, AUDITS, AUSTRIAN NATIONAL BANK, BALANCE SHEET, BALANCE SHEET EFFECTS, BALANCE SHEETS, BANK ACCOUNTS, BANK FAILURE, BANK FAILURES, BANK FOR INTERNATIONAL SETTLEMENTS, BANK OF CANADA, BANK OF ENGLAND, BANK OF GREECE, BANK OF SLOVENIA, BANK POLICY, BANK RATES, BANK RUN, BANKING SECTOR, BANKING SECTOR ASSETS, BANKING SECTOR DEVELOPMENTS, BANKING SECTORS, BANKING SUPERVISION, BANKING SYSTEM, BANKING SYSTEMS, BANKRUPTCY, BASIS POINTS, BOND, BORROWER, BUFFERS, BUSINESS CYCLE, BUSINESS CYCLES, CAPACITY BUILDING, CAPITAL ADEQUACY, CAPITAL STANDARDS, CDS, CENTRAL BANK, CENTRAL BANKING, CENTRAL BANKS, CERTIFICATES OF DEPOSITS, CLASSIFIED LOANS, COLLATERAL, COLLATERALIZATION, COMMERCIAL BANKS, CONSUMER CREDIT, CONSUMER LOANS, CONTINGENT LIABILITY, CORPORATE BORROWERS, CORPORATE DEBTS, CORPORATE DEFAULT, COUNTRY RISK, COUPON, CREDIT CARD, CREDIT GROWTH, CREDIT INSTITUTIONS, CREDIT LINES, CREDIT LOSS, CREDIT LOSSES, CREDIT MARKETS, CREDIT RATINGS, CREDIT RISK, CREDIT RISK ASSESSMENT, CREDIT RISK EXPOSURE, CREDIT RISK EXPOSURES, CREDIT RISKS, CROATIAN NATIONAL BANK, DATA RELIABILITY, DEBT, DEBT INSTRUMENTS, DEBT MARKET, DEBT SECURITIES, DEBTORS, DEFAULT PROBABILITIES, DEFAULT RATE, DEFAULT RATES, DEFAULTS, DEGREE OF LIQUIDITY, DEPOSIT, DEPOSIT INTEREST, DEPOSITORS, DEPOSITS, DERIVATIVES, DEVELOPING COUNTRIES, ECONOMETRIC MODEL, ECONOMETRIC MODELS, ECONOMIC GROWTH, EQUITIES, EXCHANGE RATE, EXCHANGE RATES, EXPERIENCE OF COUNTRIES, EXTERNAL DEMAND, EXTERNAL FINANCING, FINANCIAL ASSETS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DATA, FINANCIAL INFRASTRUCTURE, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS, FINANCIAL MARKET, FINANCIAL MARKETS, FINANCIAL PERFORMANCE, FINANCIAL PROJECTION, FINANCIAL SHOCKS, FINANCIAL STABILITY, FINANCIAL STATEMENTS, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FINANCIAL VARIABLES, FOREIGN CURRENCY, FOREIGN FUNDS, FRAUDS, GOVERNMENT BONDS, HIGH-INCOME COUNTRIES, HOLDING, HOLDINGS, IMPAIRED ASSETS, INCOME STATEMENTS, INDEBTEDNESS, INFLATION, INFLATION RATE, INTEREST INCOME, INTEREST RATE, INTEREST RATE ADJUSTMENTS, INTEREST RATE CHANGES, INTEREST RATE RISK, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL BANKING, INTERNATIONAL FINANCIAL INSTITUTIONS, INVESTMENT IN DEBT SECURITIES, LIQUID ASSETS, LIQUIDITY, LIQUIDITY MANAGEMENT, LIQUIDITY POSITION, LIQUIDITY RATIOS, LIQUIDITY RISK, LIQUIDITY RISKS, LOAN, LOAN LOSS PROVISIONS, LOAN PERFORMANCE, LOAN PORTFOLIO, LOAN PORTFOLIOS, LOAN QUALITY, LOAN STOCK, LOSS OF CONFIDENCE, MACROECONOMIC CONDITIONS, MACROECONOMIC DATA, MACROECONOMIC MODEL, MACROECONOMIC MODELS, MACROECONOMIC RISKS, MACROECONOMIC SHOCKS, MACROECONOMIC VARIABLES, MARKET CONFIDENCE, MARKET DEVELOPMENTS, MARKET DISCIPLINE, MARKET LIQUIDITY, MARKET RISK, MARKET RISKS, MARKET SHARES, MATURITIES, MATURITY, MATURITY MISMATCH, MATURITY TRANSFORMATION, MICRO DATA, MICRO-DATA, MICRODATA, MIGRATION, MONETARY POLICY, MONEY MARKET, MONEY MARKET RATES, MORTGAGE, MORTGAGE LOANS, MORTGAGES, NATIONAL BANK OF SLOVAKIA, NET OPERATING INCOME, NONPERFORMING LOANS, NPL, OPERATING EXPENSES, OPERATIONAL RISK, OVERDUE LOANS, POLICY RESPONSES, PORTFOLIO, PORTFOLIO OF SECURITIES, PREPAYMENTS, PROBABILITY OF DEFAULT, PROFITABILITY, PROVISIONING RULES, RE-CAPITALIZATION, REAL ESTATE LOANS, REAL INTEREST, REAL INTEREST RATES, RECAPITALIZATION, REGIME SWITCHES, REPRICING GAPS, RESERVE, RISK ASSESSMENTS, RISK EXPOSURES, RISK FACTORS, RISK PREMIUM, SECURITIES, SECURITIES ISSUANCE, SECURITY PRICES, SETTLEMENT, SETTLEMENT SYSTEMS, SHAREHOLDERS, SHORT TERM INTEREST RATE, SOLVENCY, SUPERVISORY AUTHORITIES, SVERIGES RIKSBANK, SWAP, SWAPS, SYSTEMIC RISK, TECHNICAL ASSISTANCE, TERMS OF CREDIT, TREASURY, TURNOVERS, VALUATION, VAR MODELS, WITHDRAWAL, WRITEDOWNS, YIELD CURVE,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100927131234 http://hdl.handle.net/10986/3917
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