Stress testing German banks in adownturn in the automobile industry

In this paper, we measure the impact of a downturn in the automobile industry on thesolvency of 28 large German banks. The choice of the stressed sector is motivated by theimportant role which the automobile industry plays in the German economy, not the leastbecause of its close ties to other industry sectors.Rather than on a particular stress forecast, the focus of the paper is on the main drivers ofthe stress impact on banks’ credit portfolios. This includes, for example, comparing the useof borrower-dependent versus sector-average default probabilities and also the influence ofsectoral and name concentrations.[...]