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Of Runes and Sagas :, Perspectives on Liquidity Stress Testing Using an Iceland Example, Martin Cihak, Li Ong

Abstract
The global financial crisis revealed weaknesses in the stress testing exercises performed on financial institutions and systems around the world. These failures were most evident in the area of liquidity risk, where now-obvious vulnerabilities were left largely undetected, with stress tests having largely focused on solvency risk. This paper uses publicly available data from a now-defunct bank in Iceland, where liquidity shocks were immense, to demonstrate how a combination of stress tests of the various risks would have provided a clearer picture of existing vulnerablities. We show that, ultimately, stress test models do not necessarily need to be complex or overly sophisticated. Basic stress tests, using appropriate assumptions and shocks, could reveal key areas of risk to inform contingency planning. The liquidity stress test templates used in this paper are included
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. The Iceland Case Study; A. Background on the Banking Crisis; B. Example: Landsbanki Íslands hf; 1. Landsbanki: Net Assets by Maturity, as at December 31, 2007; 2. Landsbanki: Initial 12-Month Liquidity Position as at December 31, 2007; 3. Iceland: Stress Test Shock Scenarios; 4. Landsbanki: 12-Month Liquidity Situation as at December 31, 2007 after FME Shocks are Applied; 5. Landsbanki: 12-Month Liquidity Situation as at December 31, 2007 After a Combination of FME and Seðanki Shocks are Applied
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (41 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781282846289

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