This paper examines macroprudential stress tests carried out by financial supervisors from a legal perspective. Stress tests are highly contingent because of their use of a number of controversial indicators such as adverse scenarios and risk models. At the same time, they constitute highly...

Financial supervisors are increasingly expected to be able to demonstrate the effectiveness of their actions. In practice, however, this proves challenging as it is difficult to prove the causality between supervisory actions and observed effects. In this paper we describe four lessons that help...

This paper shows how the role of Financial Soundness Indicators (FSIs) in financial surveillance can be usefully enhanced. Drawing from different statistical techniques, the paper illustrates that FSIs generate signals that can accurately detect, with 4 to 12 quarters lead, emerging financial...