Systemic Risk Modelling System (SRMS): a macroprudential stress testing model

Laurynas NaruÅ¡eviÄ ius () and Ieva MikaliÅ«naitÄ—-Jouvanceau ()
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Laurynas NaruÅ¡eviÄ ius: Financial Stability Department, Bank of Lithuania
Ieva Mikaliūnaitė-Jouvanceau: Financial Stability Department, Bank of Lithuania

No 41, Bank of Lithuania Discussion Paper Series from Bank of Lithuania

Abstract: This paper introduces the Systemic Risk Modelling System (SRMS), a new macroprudential stress testing model for the Lithuanian banking sector. The SRMS addresses the limitations of traditional static models by incorporating dynamic balance sheet assumptions and capturing second-round effects, providing a more comprehensive assessment of systemic risks. The model’s applications extend beyond stress testing, including macroprudential policy stance assessment, capital-at-risk analysis, and macroprudential policy impact evaluation. The SRMS model enhances the understanding of systemic risks within the Lithuanian banking sector and offers a potential benchmark for other national central banks seeking to strengthen their financial stability frameworks.

Keywords: macroprudential stress testing; macroprudential policy; feedback loop; secondround effects (search for similar items in EconPapers)
JEL-codes: E37 E58 G21 G28 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2025-01-15
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