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Macroprudential Stress Testing of Credit Risk: [electronic resource] A Practical Approach for Policy Makers Daniel Buncic

Author/Creator:
Bunčić, Daniel.
Other Title:
World Bank working papers.
Publication:
Washington, D.C., The World Bank, 2012
Series:
Policy research working papers.
World Bank e-Library.
Format/Description:
Government document
Book
1 online resource
Local subjects:
Eastern Europe. (search)
System Details:
Mode of access: World Wide Web.
Summary:
Drawing on the lessons from the global financial crisis and especially from its impact on the banking systems of Eastern Europe, the paper proposes a new practical approach to macroprudential stress testing. The proposed approach incorporates: (i) macroeconomic stress scenarios generated from both a country specific statistical model and historical cross-country crises experience; (ii) indirect credit risk due to foreign currency exposures of unhedged borrowers; (iii) varying underwriting practices across banks and their asset classes based on their relative aggressiveness of lending; (iv) higher correlations between the probability of default and the loss given default during stress periods; (v) a negative effect of lending concentration and residual loan maturity on unexpected losses; and (vi) the use of an economic risk weighted capital adequacy ratio as the relevant outcome indicator to measure the resilience of banks to materializing credit risk. The authors apply the proposed approach to a set of Eastern European banks and discuss the results.
Notes:
Description based on print version record.
Contributor:
Bunčić, Daniel.
Melecky, Martin
World Bank.
Other format:
Print version: Buncic, Daniel. Macroprudential Stress Testing of Credit Risk:.
Publisher Number:
10.1596/1813-9450-5936
Access Restriction:
Restricted for use by site license.
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