Systemic Risk and Stress Testing
The workshop addresses systemic risks and how to identify vulnerabilities in the banking sector. We will discuss top-down stress testing, following the latest guidelines, and present methodologies through practical examples.
Participants will receive a comprehensive overview of systemic risk and stability, dimensions and framework of financial stability policy of crisis prevention and management. They will focus on top-down stress tests, focus on dynamic models and discuss latest observations.
They will be exposed to different scenarios of bank-wide stress tests. Cross-sectoral (insurance and pension funds sectors) comparison will also be addressed to illustrate specificities and differences.
The workshop is based around an interactive case study. With this practical exercise, the participants will analyse risks and key macroprudential indicators for assessment of financial stability, discuss scenarios, and propose actions in response to provided stress tests.
We will work on:
- Systemic risk, financial stability, and macroprudential policy framework
- Bank-wide and cross-sectoral stress tests
- ECB stress testing toolbox (e.g. Macrofinancial scenario design and models; Satelite models for credit and market risk: translating macro-financial scenario into asset valuation and quality; Dedicated composite models for systemic risk analysis: contagion analysis)
- Example of the use of top down infrastructure in the EU wide stress test exercise
- Large model stress testing (e.g. Semi-structural model with heterogeneous banks; modelling the feedback loop between banks and real economy; Policy applications of macroprudential stress testing e.g. CCyB calibration)
- Example of setting up a macroprudential stress test exercise on the basis of EU-wide stress test scenarios
- Practical case study exercise – work in groups
Staff from financial stability and research departments and experts involved in conducting top-down stress tests. The workshop is also intended for senior officials who interact with other economic and financial agencies and policy advisers in units responsible for policy planning and coordination. Central banks and other competent authorities with a financial stability mandate are invited to join.
- Katarzyna Budnik, European Central Bank
- Petr Jakubik, European Insurance and Occupational Pensions Authority EIOPA
This learning initiative is supported by: