European Parliament Library

Credibility and Crisis Stress Testing, Li Ong, Ceyla Pazarbasioglu

Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs
Table Of Contents
Cover; Abstract; Contents; I. Introduction; II. The Data; III. Identifying the Successful Crisis Stress Tests; Figures; 1. Solvency Stress Testing Applications; Tables; 1. Case Studies: Crisis Stress Tests; 2. Market Data: Financials Stock Price Index and CDS Spreads; IV. Designing an Effective Crisis Stress Test; A. Key Elements; Timing; 2. United States: The Sentiment after the SCAP; 3. European Union: The Ebb from the EBA; 4. Ireland: The Pain before the PCAR; 5. Spain: The Floor under the FSAP; 3. Crisis (and Follow-up) Stress Tests: Effectiveness Scorecard
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (64 p.)
Specific Material Designation
Form Of Item

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