Macroprudential Stress-Testing Practices of Central Banks in Central and South Eastern Europe : An Overview and Challenges Ahead
Stress tests are the main practical tools of macroprudential oversight. This paper reviews the stress-testing practices of central banks in Central and South Eastern Europe (CSEECBs) and outlines the challenges in the area of stress testing going f...
| Main Authors: | , |
|---|---|
| Language: | English |
| Published: |
2012
|
| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100927131234 http://hdl.handle.net/10986/3917 |
| Summary: | Stress tests are the main practical
tools of macroprudential oversight. This paper reviews the
stress-testing practices of central banks in Central and
South Eastern Europe (CSEECBs) and outlines the challenges
in the area of stress testing going forward. The authors
discuss good practice and the applied approaches by CSEECBs
focusing on the main components of a typical macroprudential
stress test, i.e. constructing the baseline and stress
scenarios, mapping macroeconomic scenarios and microeconomic
factors to risk factors, calculating risk exposures to
different risk indicators, and estimating outcome indicators
to inform macroprudential policy. The main challenges for
the CSEECBs going forward involve needed improvements in
data reliability, consideration of quantitative
microprudential indicators in macroprudential stress tests,
explicit incorporation of dynamics in stress tests to
include reaction functions of banks and macroprudential
policy, institutionalization of macroprudential policy
responses to alarming stress-test results, use of the
top-down and bottom-up stress test results in supervisory
communication, cooperation of macroprudential and
microprudential supervision, and information exchange for
better cross-border supervision of international banking groups. |
|---|