Sketching a roadmap for systemic liquidity stress tests

Grzegorz Hałaj and Jerome Henry

Journal of Risk Management in Financial Institutions, 2017, vol. 10, issue 4, 319-340

Abstract: This paper aims to identify and specify guiding principles for designing and implementing a systemic liquidity stress test (SLST), a necessary complement to more standard, and by now systemic, solvency stress tests. The paper focusses on the types of data and models that would be ideally required. We also illustrate with a concrete example how to operationalise these principles for a system of European banks. The paper will then provide practical guidelines for policymakers and analysts building an SLST set-up or process, with a view to assessing liquidity risks and to understanding shock propagations in a complex financial system. Both elements are specifically relevant to macroprudential authorities.

Keywords: liquidity; stress-test; macroprudential; systemic risk; network; contagion (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2017:v:10:i:4:p:319-340

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