Does Regulatory Stress Testing Make Banks Perform Better and Be Less Risky?

Karel Janda () and Oleg Kravtsov
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Karel Janda: University of Economics, Prague

A chapter in Digitalization in Finance and Accounting, 2021, pp 109-120 from Springer

Abstract: Abstract In this paper, we examine the impact of regulatory scrutiny of stress testing on the risk-taking and performance of the banks in the European Union (EU). Our findings suggest that the banks with the poorer capitalization or capital gap according to the results of EU-wide stress testing, reduce more intensively the riskiness of their portfolio and non-performing exposure. The banks with larger buffer or surplus in stressed capital do not increase risk in the portfolio or exhibit the excessive loan growth. Our paper contributes to the literature dedicated to the investigation of the implications of regulatory stress tests on the bank´s conduct.

Keywords: Stress test; Regulatory capital; Capital ratio; Risk management (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-55277-0_10

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DOI: 10.1007/978-3-030-55277-0_10

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