Stress tests
Basel capital ratios lost credibility during crisis - Atlanta Fed paper investigates
Working paper says reliance of the Basel standards on overstated asset values in reported equity capital caused capital adequacy ratios to lose credibility with financial markets
Draghi wants European public backstop for stress tests
ECB president Mario Draghi says both national and European public funds should be in place ahead of the comprehensive assessment to ensure it is a ‘credible exercise’
IMF paper backs stress test ‘rules of thumb’
Researchers from the IMF and BIS say rough guides to the typical relationships between credit levels and bank solvency can be useful tools in bank stress tests
Bank of Slovenia lifts lid on bank health checks
The 10 banks under investigation will be subjected to asset quality reviews and bottom-up stress tests; results will be challenged by an outside consultancy
Constâncio insists private sector will play ‘major’ role in filling capital shortfalls
The ECB’s vice-president says banks will be able to fill any capital holes turned up in the central bank’s comprehensive assessment at least partly through private funds
Federal Reserve reveals new, tougher stress tests
Details of stress tests for 2014 include scenario based on severe global recession, with some banks facing additional criteria; tests will be applied to 12 more banks than before
Slovene bank clean-up provides stress test dry run for ECB
IMF urges country to recapitalise banks quickly; academics see country as 'methodology experiment' for ECB, and warn comparisons with Greece and Cyprus could be self-fulfilling prophecies
BIS paper weighs future of liquidity stress tests
Bank for International Settlements working group compiles survey on current stress-testing practices among its members, and identifies a basic framework of what future tests could include
ECB unveils three-pronged comprehensive assessment
European Central Bank reveals the methodology behind the risk assessment, asset quality review and stress test it will use to scrutinise the eurozone’s largest banks over the next year
BoE's Tucker wants more robust CCP governance
Bank of England deputy governor Paul Tucker raises concerns over the size and for-profit nature of CCPs; says stress tests not possible until loss allocation work is finalised
Bank of England proposes new stress test regime
Deputy governor Paul Tucker says new framework will boost confidence in the UK financial system and help ensure the Bank is publicly accountable for its financial stability operations
BIS research dismisses fears over high-quality asset shortage
Article says increase in high-quality assets appears sufficient to meet rising demand, but risks could still come from elsewhere
Fed urges big banks to improve internal capital planning
Federal Reserve says lenders must strengthen methods for assessing risks; reveals 18 biggest US lenders face challenges in one or more areas
Bank of Slovenia widens group of stress test banks
Ten lenders, including three deemed systemically important, will be scrutinised by leading accounting firms in a joint effort with the Slovenian finance ministry
Sector-specific variables more relevant than thought in determining default risk
The effect and magnitude of risk drivers across sectors is highly heterogeneous, which should be taken into account when designing stress-testing analytical tools, research paper argues
Kuwaiti central bank details triumvirate of stress tests
Central Bank of Kuwait releases annual report; details its three-pronged approach to stress-testing the country’s banks
Danish paper uses three centuries of data to show tail risks underestimated
Research says severe stress cannot be properly understood with short time horizons; suggests results could be used to design tougher stress tests
ECB working paper puts forward new model for use in stress tests
Working paper based on risk-return optimal program in which banks aim to maximise risk-adjusted returns while taking into account regulatory capital and liquidity constraints
Arbitrage threat kept 'fallible' leverage ratio to 4%, says Vickers
Vickers says his 'blue skies thinking' leverage ratio would have been 10%, and adds stress testing avoids banks gaming the system
IMF researcher proposes new method for top-down stress testing
New, simple methodology for structural market-based top-down macro stress tests aims to overcome onerous data requirements
Bernanke says Fed stress tests were a ‘critical turning point’ in crisis
Fed chair says stress tests offer macro-prudential dimension to supervision; US banks have more tier 1 common equity under a severe stress scenario than they did in reality in 2008
Banque de France research proposes framework to address stress-test failings
Researchers use statistical tests for detection of outliers to characterise severity and duration of stressed periods; suggests length of shock depends on the initial variables
IMF attempts to sculpt better stress tests
Stress tests are ‘more art than science’ but can be improved and expanded, according to IMF study; cannot be standardised across countries
UK gears up to new era of prudential regulation
The UK will adopt ‘twin peaks’ supervision in April in a bid to restore integrity to its financial system. Chris Jeffery talks to the Bank of England’s Sarah Breeden about the challenges ahead