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Into the Great Unknown :, Stress Testing with Weak Data, Li Ong, Rodolfo Maino, Nombulelo Braiton

Creator
Abstract
Stress testing has become the risk management tool du jour in the wake of the global financial crisis. In countries where the information reported by financial institutions is considered to be of sufficiently good quality, and supervisory and regulatory standards are high, stress tests can be of significant value. In contrast, the proliferation of stress testing in underdeveloped financial systems with weak oversight regimes is fraught with uncertainties, as it is unclear what the results actually represent and how they could be usefully applied. In this paper, problems associated with stress tests using weak data are examined. We offer a potentially more useful alternative, the "breaking point" method, which also requires close coordination with on-site supervision and complemented by other supervisory tools and qualitative information. Excel spreadsheet templates of the stress tests presented in this paper are provided
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. The Data; 1. Baseline: Selected Bank Balance Sheet Items for Country X, as at End-2009; 2. Loan Classifications and Provisioning Requirements for Country X; III. Weaknesses in the "Ad Hoc Shock" Method; 3. Stress Test Assumptions: Ad Hoc Shocks to Asset Quality; A. Analysis; 4. Ad Hoc Shock Stress Test: Maximum Possible Migration Down Classifications; 5. Scenario 1a: Ad Hoc Shock to Aggregate NPLs Using a 100 Percent Provisioning Rate vs. to Loans by Classification
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (33 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781455211647

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