Stress testing banks' profitability: the case of French banks

Jerome Coffinet and Shanlang Lin

Working papers from Banque de France

Abstract: We build a stress testing framework to evaluate the sensitivity of banks profitability to plausible but severe adverse macroeconomic shocks. Specifically, we test the resilience of French banks using supervisory data over the period 1993-2009. First, we identify the macroeconomic and financial variables (GDP growth, interest rate maturity spread, stock market s volatility) and bank-specific variables (size, capital ratio, ratio of non interest income to assets) that significantly affect French banks profitability. Second, our macroeconomic stress testing exercises based on a simulation of macroeconomic variables show that French banks profitability is resilient to major adverse macroeconomic scenarios. Specifically, our findings highlight that even severe recessions would leave the French banking system profitable.

Keywords: bank profitability; dynamic panel estimation; stress test. (search for similar items in EconPapers)
JEL-codes: C23 G21 L2 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2010
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Stress-Testing Banks’ Profitability: The Case of French Banks (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:306

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