Stress Testing the Enterprise Sector's Bank Debt: A Micro Approach

Eivind Bernhardsen and Bjorne Dyre Syversten
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Eivind Bernhardsen: Financial Supervisory Authority of Norway
Bjorne Dyre Syversten: Norges Bank

International Journal of Central Banking, 2009, vol. 5, issue 3, 111-138

Abstract: This paper describes Norges Bank’s micro stress-testing framework for assessing the Norwegian banking sector’s losses on loans to the nonfinancial enterprise sector. Using projected macro variables and a stock-flow approach, annual financial statements of every firm in Norway are projected five years ahead. The loan loss potential is then assessed using a creditscoring model. We present a backtest of projections, taking the history of macro variables as given. Our results are fairly good using a relatively simple setup, and we conclude that stockflow projections of financial statements can be useful for stress testing banks’ loan portfolios.

JEL-codes: G21 G32 G33 M49 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2009:q:3:a:4

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