Stress tests
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
Fed stress tests reveal potential for losses of $460 billion
Stress tests show banks would suffer heavy losses if another financial crisis hits, with some hovering very close to the US Federal Reserve’s minimum core capital requirements – and one falling below
ECB researchers suggest refinements to macro stress tests
Working paper identifies a number of factors in addition to growth that determine the rate of non-performing loans; authors say this could allow for more accurate stress testing
Stress test transparency can ‘persuade’ investors, says Bundesbank paper
Deutsche Bundesbank study says the disclosure of stress testing results and methodology can be designed to alter investor behaviour
Fed includes ‘doomsday scenario’ in next round of stress tests
Baseline, adverse and severely adverse scenarios specified in preparation for 2013 stress testing; 'severely adverse' would cover failure to resolve ‘fiscal cliff'
Customer funding gaps fall at Danish banks
Stress tests performed by the National Bank of Denmark show an increase in the capitalisation of the country’s banks; funding gaps shrink as deposits soar and lending falls
Fed publishes final rules on stress testing
Stress-test scenarios for bank-holding companies and non-bank financial institutions to be set by Fed; questions raised regarding suitability of tests for determining remedial action
BoE quarterly bulletin presents latest research
Quarterly bulletin gives overview of economic developments and contains papers on stress-tests, factors behind low sovereign bond yields and uncertainty in inflation forecasts among other topics
Fed considers delaying stress tests for large banks
Federal Reserve considering altering the implementation timeline for stress tests required under Dodd-Frank; follows concerns raised about immediate effect date of changes
The flaws in the Fed's new macro stress test proposals
Stress tests under fire
Boston Fed paper investigates uncertainty in interbank markets
Research examines role of uncertainty in causing the collapse of interbank lending markets; finds government intervention to provide information may help to restart lending
Danish banks 'robust' says central bank
Financial Stability Report notes solid performance from 13 largest banks; tracks trend for declining numbers of financial institutions in the country
Central Bank of Colombia paper evaluates CrashMetrics risk estimation
Researchers examine CrashMetrics risk estimation methodology; find it makes better predictions during crises than traditional stress tests