The Basel capital adequacy ratios lost credibility with financial markets during the crisis. This paper argues that failure was the result of the reliance of the Basel standards on overstated asset values in reported equity capital. The United States' stress tests were able to assist in...

This article describes the background, design choices and particular details of stress tests used as part of an overall supervisory regime; that is, their formal integration into the process of the ongoing prudential supervision of banks and other large financial institutions. We then describe...

This paper discusses the role of risk management and corporate governance as causal factors in the onset of the financial crisis. The downturn in the housing and mortgage markets precipitated the first phase of the financial crisis in August 2007 when the solvency of a number of large financial...

The traditional approach to the stress testing of financial institutions focuses on capital adequacy and solvency. Liquidity stress tests have been applied in parallel to and independently from solvency stress tests, based on scenarios which may not be consistent with those used in solvency...

The banking sector is a complex system composed of a large number of stakeholders that interacts in a non-simple way continuously and which plays the key role in economic development of each country. The economies of developing countries like Albania are characterized by high demand for credit...

The traditional approach to the stress testing of financial institutions focuses on capital adequacy and solvency. Liquidity stress tests have been applied in parallel to and independently from solvency stress tests, based on scenarios which may not be consistent with those used in solvency...

We present a stochastic simulation forecasting model for stress testing that is aimed at assessing banks’ capital adequacy, financial fragility, and probability of default. The paper provides a theoretical presentation of the methodology and the essential features of the forecasting model on...

The aim of this article is to highlight the importance and effectiveness of stress testing as part of microprudential policy. We focus on microprudential stress testing to assess financial stability, the resilience and solvency of one important private bank in Algeria in the face of liquidity...

This study examines the exposure of microfinance institutions to liquidity-, interest rate and foreign exchange (FX) risk. Using manually collected data from microfinance institutions' financial reporting, I find that the microfinance sector faces minimal liquidity risk, high interest rate risk...

Macro-prudential authorities need to assess medium-term downside risks to the real economy, caused by severe financial shocks. Before activating policy measures, they also need to consider their short-term negative impact. This gives rise to a risk management problem, an inter-temporal trade-off...