Banking euro area stress test model

Katarzyna Budnik (katarzyna.budnik@ecb.europa.eu), Mirco Balatti, Ivan Dimitrov, Johannes Groß, Michael Kleemann, Tomas Reichenbachas, Francesco Sanna, Andrei Sarychev, Nadežda Siņenko and Matjaž Volk

No 2469, Working Paper Series from European Central Bank

Abstract: The Banking Euro Area Stress Test (BEAST) is a large scale semi-structural model developed to assess the resilience of the euro area banking system from a macroprudential perspective. The model combines the dynamics of a high number of euro area banks with that of the euro area economies. It reflects banks’ heterogeneity by replicating the structure of their balance sheets and profit and loss accounts. In the model, banks adjust their assets, interest rates, and profit distribution in line with the economic conditions they face. Bank responses feed back to the macroeconomic environment affecting credit supply conditions. When applied to a stress test of the euro area banking system, the model reveals higher system-wide capital depletion than the analogous constant balance sheet exercise. JEL Classification: E37, E58, G21, G28

Keywords: banking sector deleveraging; macroprudential policy; macro stress test; real economy-financial sector feedback loop (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cba, nep-eec, nep-fdg and nep-mac
Note: 1355359
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Citations: View citations in EconPapers (10)

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