Macroprudential stress test of the euro area banking system

Katarzyna Budnik (), Mirco Balatti, Ivan Dimitrov, Johannes Groß, Ib Hansen, Michael Kleemann, Francesco Sanna, Andrei Sarychev, Nadežda Siņenko, Matjaž Volk, Giovanni Covi, Giovanni di Iasio (), Katharina Cera, Margherita Giuzio, Harun Mirza, Diego Moccero (), Giulio Nicoletti, Cosimo Pancaro and Spyros Palligkinis

No 226, Occasional Paper Series from European Central Bank

Abstract: This paper presents an approach to a macroprudential stress test for the euro area banking system, comprising the 91 largest euro area credit institutions across 19 countries. The approach involves modelling banks’ reactions to changing economic conditions. It also examines the effects of adverse scenarios on economies and the financial system as a whole by acknowledging a broad set of interactions and interdependencies between banks, other market participants, and the real economy. Our results highlight the importance of the starting level of bank capital, bank asset quality, and banks’ adjustments for the propagation of shocks to the financial sector and real economy. JEL Classification: E37, E58, G21, G28

Keywords: banking sector deleveraging; macroprudential policy; macro stress test; real-financial feedback mechanism (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-cba and nep-eec
Note: 1355359
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbops:2019226

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