Stress Testing the Exposure of Austrian Banks in Central and Eastern Europe

Michael Boss (), Gerald Krenn (), Claus Puhr () and Markus Schwaiger ()
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Michael Boss: Oesterreichische Nationalbank
Gerald Krenn: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division
Claus Puhr: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division
Markus Schwaiger: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division, http://www.oenb.at

Financial Stability Report, 2007, issue 13, 115-134

Abstract: Austrian banks are heavily engaged in Central and Eastern European (CEE) markets primarily by running local subsidiaries but also by extending cross-border loans. We give an account of the historical development and the status quo of these exposures and conduct a stress test for the Austrian banking system with respect to its credit exposure vis-à-vis the CEE region. Our test is based on an analysis of the current state of the local banking systems from a risk perspective, inter alia drawing on stress testing experiences gained by the national central banks and the International Monetary Fund. We use a stress scenario that (i) takes account of the differences in host country risks and (ii) represents a worst case that deliberately exceeds historical shocks. It turns out that, despite the dramatic worsening of the economic environment implied by the scenario, the Austrian banking system is not put at risk by the hypothesized crisis. The possible repercussions of a crisis in a single country via solvency problems of the Austrian parent institution turn out to be well limited.

Keywords: financial stability; Central and Eastern Europe; stress t testing; credit risk. (search for similar items in EconPapers)
JEL-codes: F23 G15 G21 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (9)

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