Rules of Thumb for Bank Solvency Stress Testing

Daniel Hardy and Christian Schmieder

No 2013/232, IMF Working Papers from International Monetary Fund

Abstract: Rules of thumb can be useful in undertaking quick, robust, and readily interpretable bank stress tests. Such rules of thumb are proposed for the behavior of banks’ capital ratios and key drivers thereof—primarily credit losses, income, credit growth, and risk weights—in advanced and emerging economies, under more or less severe stress conditions. The proposed rules imply disproportionate responses to large shocks, and can be used to quantify the cyclical behaviour of capital ratios under various regulatory approaches.

Keywords: WP; AC bank; default rate; bank solvency; net income; growth rate; Stress testing; rules of thumb; bank stability; bank capitalization; loss rate; EC bank; profit and loss account; A. bank characteristic; IRB bank; bank management; operating expenses; customer loan; bank solvency stress tests; Personal income; Capital adequacy requirements; Credit; Credit ratings; Western Europe; Central and Eastern Europe; Europe; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 67
Date: 2013-11-11
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Citations: View citations in EconPapers (14)

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