Financial Stability and Stress Testing
About this learning event
This workshop focuses on the role of stress testing in financial stability and how vulnerabilities in the banking sector can be diagnosed. We discuss the various types of stress tests that regulators run, look into the latest practices, study the most recent guidelines and present methodologies through practical examples.
Participants will receive a comprehensive overview of how stress testing is performed: the different types of exercises that can be run, scenario building and the interpretation of results. They will investigate different types of risks that can be diagnosed by means of stress testing and the considerations that should be taken into account when designing a stress test modeling (ex. defining transmission channels which play a key role in determining second-round effects). A special focus will be given to top-down stress testing, dynamic models and individual country experiences.
Afterwards, participants will work on a case study that presents an integrated solvency, liquidity and macroeconomic stress testing framework. In groups, they will use a simulation tool to answer questions about the capacity of several banks to withstand shocks. The teams will prepare short presentations about their findings and share insights in a discussion session.
Topics to be discussed at this course:
- financial stability and stress testing
- individual bank and system-wide stress tests
- the ECB’s stress testing toolbox
- top down infrastructure in the EU-wide stress test exercise
- creating an integrated stress testing framework
- studying the impact of an inflationary shock on borrower repayment capacity using a new policy analysis tool called the DSTI Gap
- simulating a 30-day cash outflow stressed scenario with the LCR and looking into the construction of the NSFR
- integrating macroeconomic factors through satellite models
- how climate risks fit into the stress testing framework
Staff from financial stability, banking supervision and research departments, as well as 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.
The workshop is highly interactive and participants are required to actively participate at all parts of the event. The event includes work in groups on case studies and discussion sessions, so a working knowledge of English is required to take part.
Alexandru Monahov, Expert Consultant, Financial Stability Division, National Bank of Moldova
Alexandru is currently the Expert Consultant for the Financial Stability Division of the National Bank of Moldova where he specializes in stress testing, macroprudential policy, financial risk indicators and econometric modeling. Previously, he worked as assistant and, subsequently, associate professor at the University of Nice and IAE in France, where he taught Finance, Economics and Business Administration. He developed training and professional education curricula for the Chambers of Commerce and Industry and directed several continuing education programs. Alexandru holds a PhD from the University Cote d’Azur (France) and a Professional Certificate in Advanced Risk Management from the New York Institute of Finance (United States).
Katarzyna Budnik, Advisor, Stress Test Modelling Division, European Central Bank
Katarzyna oversights for macroprudential stress testing and policy assessment. She joined the ECB in 2010 and has worked in different areas of Financial Stability and Economics. Prior to moving to the ECB, she was heading the Forecasting Division at the National Bank of Poland. She received her PhD degree (Econ) with honors from the Warsaw School of Economics. Her research interests include macroprudential and monetary policies, banking, macroeconomic modelling and labor markets.
This learning initiative is supported by: