Systemic risk measures and macroprudential stress tests. An assessment over the 2014 EBA exercise

Chiara Pederzoli () and Costanza Torricelli

Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) from Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi"

Abstract: The European Banking Authority (EBA) stress tests, which aim to quantify banks’ capital shortfall in a potential future crisis (adverse economic scenario), further stimulated an academic debate over systemic risk measures and their predictive/informative content. Focusing on marked based measures, Acharya et al. (2010) provides a theoretical background to justify the use of Marginal Expected Shortfall (MES) for predicting the stress test results, and verify it on the first stress test conducted after the 2007-2008 crises on the US banking system (SCAP, Supervisory Capital Assessment Program). The aim of this paper is to further test the goodness of MES as a predictive measure, by analysing it in relation to the results of the 2014 European stress tests exercise conducted by EBA. Our results are strongly dependent on index used to capture the systemic distress event, whereby MES, based on a global market index, does not show association with EBA stress test, by contrast to F-MES, which is based on a financial market index, and has a significant information and predictive power. Our results may carry useful regulatory implication for the stress test exercises.

Keywords: systemic risk; stress test; macroprudential regulation (search for similar items in EconPapers)
JEL-codes: G01 G10 G28 (search for similar items in EconPapers)
Pages: pages 26
Date: 2015-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Journal Article: Systemic risk measures and macroprudential stress tests: an assessment over the 2014 EBA exercise (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mod:wcefin:0054

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