Bank stress testing under different balance sheet assumptions

Ramona Busch, Christian Drescher and Christoph Memmel

No 07/2017, Discussion Papers from Deutsche Bundesbank

Abstract: Using unique supervisory survey data on the impact of a hypothetical interest rate shock on German banks, we analyse price and quantity effects on banks' net interest margin components under different balance sheet assumptions. In the first year, the cross-sectional variation of banks' simulated price effect is nearly eight times as large as the one of the simulated quantity effect. After five years, however, the importance of both effects converges. Large banks adjust their balance sheets more strongly than small banks, but they are impacted more strongly by the price effect. The quantity effects are explained better by a bank's current balance sheet composition, the longer the forecast horizon. The opposite holds for banks' price effect.

Keywords: stress testing; low-interest-rate environment; net interest margin; static balance sheet; dynamic balance sheet; price effect; quantity effect (search for similar items in EconPapers)
JEL-codes: G11 G21 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-acc and nep-ban
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:072017

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