Stress testing European banks: Lessons for risk managers

Piers Haben and Benjamin Friedrich

Journal of Risk Management in Financial Institutions, 2015, vol. 8, issue 3, 264-276

Abstract: Stress tests are an increasingly important component of the risk management and supervisory landscape. The objectives, processes and outcomes can, by design, differ between financial institutions’ own stress tests and supervisory stress tests. But there are vital lessons that can be shared. Drawing on experience of the 2014 EU-wide stress test for the EBA, the authors identify some core lessons from the supervisory world that should resonate with risk managers trying to integrate stress testing into a coherent risk management framework across their institutions. For the purposes of simplicity they group these lessons into: governance, including communication upwards; data infrastructure and integrating stress tests into a broader risk management framework. This paper does not intend to offer detailed solutions. Rather, it aims to draw parallels between the supervisory and risk management world, to identify some common challenges and provide some insight into the experience so far in dealing with these challenges. More importantly, this paper invites further consideration and insight into how these challenges might be faced in the future.

Keywords: supervisory stress testing; bottom-up stress test; stress test governance; data infrastructure; EU-wide stress test; European Banking Authority (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hstalks.com/article/636/download/ (application/pdf)
https://hstalks.com/article/636/ (text/html)
Requires a paid subscription for full access.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2015:v:8:i:3:p:264-276

Access Statistics for this article

More articles in Journal of Risk Management in Financial Institutions from Henry Stewart Publications
Bibliographic data for series maintained by Henry Stewart Talks ().