Climate change can be a source of financial risk. This paper examines how credit rating agencies accepted by the Eurosystem incorporate climate change risk in their credit ratings. It also analyses how rating agencies disclose their assessments of climate change risks to rating users. The paper...

Since the last global financial crisis supervisory mechanisms and regulations have become more stringent which have significantly improved resilience of banks therefore positively affecting financial stability. Apart from traditional financial institutions which have been supervised according to...

The recent wave of financial innovation, particularly innovation related to the application of information and communication technologies, poses a serious challenge to the financial industry’s business model in both its banking and non-banking components. It has already revolutionised...

By liquidity services, we mean in this paper the whole set of key activities which permit that the final holders of financial claims may switch to cash when needed while nevertheless providing stable long term financing to companies and households. Secondary securities markets, financial...

We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a CDS market can be designed to rewire the network of...

This paper first describes the treatment of counterparty credit risk of OTC derivatives under Basel II. It present Standard Method SM and Current Exposure Method CEM of calculating EAD. It also offer evaluation of those methods and their shortfalls. Second, a model of counterparty credit risk...

Based on technical assistance to central banks by the IMF’s Monetary and Capital Markets Department and Information Technology Department, this paper examines fintech and the related area of cybersecurity from the perspective of central bank risk management. The paper draws on findings from...

This paper proposes an operational approach to stress testing, allowing one to assess the banking sector's vulnerability in multiple plausible macro-financial scenarios. The approach helps identify macro-financial risk factors of particular relevance for the banking system and individual banks...

Financial technology innovations (Fintech) are changing the provision of traditional financial services. Although they bring with them various benefits and opportunities, they also have weaknesses and pose potential threats to financial systems. The paper examines the latest developments in the...