Scenarios for future banking: implications for profitability, liquidity and solvency

Christian Schmieder, Min Wei and Li Lian Ong

No 1394, BIS Working Papers from Bank for International Settlements

Abstract: Liquidity risk remains a persistent threat to financial stability, as starkly demonstrated by the 2023 banking turmoil in the United States and Europe. Hence, the ability to quickly gauge banks’ liquidity risks could prove useful especially during periods of market stress, but also to assess differences in liquidity buffers across peer economies and banks. Yet, publicly available information on banks’ liquidity resilience is patchy: regulatory disclosures are limited in coverage and history, and supervisory liquidity stress tests are typically run by authorities using confidential data. To help fill this gap, our paper introduces a freely available, interactive liquidity stress-testing toolkit 2 for assessing Basel III liquidity coverage ratio-type shocks at the bank and economy level. It covers nearly 13,000 commercial banks across more than 100 economies since 2006, and incorporates pre-calibrated benchmark scenarios, pre-run simulations, and user-defined scenario options. An innovative “breakeven stress factor”—the minimum shock intensity at which a bank’s net liquidity turns negative—is the central output metric. Using the tool, we find meaningful cross-country heterogeneity in liquidity resilience and persistent rank ordering over time. We also discuss how rising run-off rates in a digitalised world and growing NBFI linkages challenge existing frameworks.

Keywords: liquidity risk; liquidity stress testing; Basel III; global bank data; scenario analysis (search for similar items in EconPapers)
JEL-codes: C63 G01 G17 G21 G28 (search for similar items in EconPapers)
Date: 2026-11
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1394

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