This paper applies the Growth-at-Risk (GaR) framework to assess downside risks to euro area GDP growth, and it examines its usefulness for stress testing. Supervisory stress-test scenarios are often criticized for being either too mild or implausibly severe, raising questions about calibration....

The financial crisis of 2007-2008 highlighted the risks that liquidity spirals pose to financial stability. We introduce a novel method for studying liquidity spirals and use this method to identify spirals before stock prices plummet and funding markets lock up. We show that liquidity spirals...

This first climate transition risk stress test for the Albanian banking sector assesses the macroeconomic and financial sector implications of Albania's shift to a low-carbon economy under different climate policy scenarios. It builds upon earlier exposure analyses conducted for the Albanian...

Over the past decade, the Albanian banking sector has undergone a remarkable transformation amid strong macroeconomic performance and sound financial reforms. Nevertheless, pockets of vulnerability remain, including some that were identified during the IMF's 2014 Financial Sector Assessment...

This technical note focuses on systemic risk analysis and stress testing as part of the Slovak Republic's Financial Sector Assessment Program. The FSAP for the Slovak Republic implemented an extensive analysis of systemic risks and assessed the resilience of the banking sector. It identified key...

The technical assistance mission developed a multi-factor, multi-period solvency stress testing framework for banks supervised by the Central Bank of Barbados (CBB) and credit unions supervised by the Financial Services Commission (FSC). This framework is built around explicit macroeconomic...

This study investigates the impact of supervisory stress testing on banks' behaviors and their systemic risk implications. Utilizing confidential supervisory data from the European Banking Authority's EU-wide stress tests in 2021 and 2023, we employ a difference-in-differences framework to...

In this handbook, we define a cyber stress test as 'a targeted assessment of the resilience of individual organisations and their ability to withstand and recover from significant cybersecurity incidents, ensuring the provision of critical services, in different risk scenarios.' Stress tests...

Do climate stress tests affect bank credit supply to brown firms? Using a difference-in-differences approach and detailed data on individual bank loans in the euro area, this paper provides novel evidence on the effects of the ECB's 2022 climate risk stress test. Despite no capital implications...

ECB Banking Supervision has concluded its 2025 solvency stress test for euro area significant institutions. A total of 51 significant institutions directly supervised by the ECB took part in the EU-wide stress test coordinated by the European Banking Authority (EBA) in cooperation with the...

We develop a novel stress testing framework to quantify the risks to the German banking sector from the green transition. Our methodology combines a macro-level and a micro-level approach to calculate scenario-dependent probabilities of default and losses. The macro approach leverages...

The FSAP team undertook a thorough top-down corporate and bank solvency, bank liquidity stress tests as well as analysis of interconnectedness using mid-2023 data. This note covers the methodology and results of the scenario-based solvency test, the single factor sensitivity analysis, the...

The Technical Assistance (TA) mission, conducted in Victoria, Seychelles, from May 2 to 17, 2023, assisted authorities with macroprudential stress testing and climate risk analysis. The stress testing focused on strengthening the solvency and liquidity frameworks: (i) for solvency, considering...

This report presents the results of a literature review on stress tests developed and applied in non-food supply chains. The primary focus of the project is on quantitative and qualitative methodologies applied in the literature for stress testing non-food supply chains, their advantages and...

Purpose - This paper aims to examine how bank stress tests affect bank tax planning. Design/methodology/approach - The study uses US bank stress test bank size thresholds and a regression discontinuity design to investigate the effect of the Dodd-Frank Act and the instituted bank stress tests on...

This paper assesses the impact of floods on credit to European small and medium-sized enterprises (SMEs) using a discrete-time survival model. We find a statistically significant relationship between the default probability of loans to SMEs and floods occurring in the region where the firm is...

Do climate stress tests affect bank credit supply to brown firms? Using a difference-in-differences approach and detailed data on individual bank loans in the euro area, this paper provides novel evidence on the effects of the ECB's 2022 climate risk stress test. Despite no capital implications...

Traditional exposure measures focus on direct exposures to evaluate the losses an institution is exposed to upon the default of a counterparty. Since the Global Financial Crisis of 2007-2008, the importance of indirect exposures via common asset holdings is increasingly recognized. Yet direct...

This study investigates the impact of supervisory stress testing on banks' behaviors and their systemic risk implications. Utilizing confidential supervisory data from the European Banking Authority's EU-wide stress tests in 2021 and 2023, we employ a difference-in-differences framework to...

In this paper, we propose a new framework to jointly calibrate cyclical and structural capital requirements. For this, we integrate a non-linear macroeconomic model and a stress test model. In the macroeconomic model, the severity of the scenarios depends on the level of cyclical risk....

The expansion of central bank balance sheets has become a critical topic in the wake of the Global Financial Crisis and the COVID-19 pandemic. Central banks have taken unprecedented measures to ensure price stability and financial stability, particularly when traditional policy tools were...

This report provides a brief summary of the purpose and findings of a technical assistance (TA) mission that was intended to review and evaluate the Reserve Bank of India (RBI)'s stress test model suite, which took place in April 2023. The RBI's model suite was found to be strong and well...

This report summarizes the content and findings of a technical assistance (TA) mission that was reviewing and evaluating the Reserve Bank of India (RBI)'s stress test model suite. The RBI's model suite was found to be strong and well developed in numerous respects. The most noteworthy...

During two visits in 2023-24, the IMF mission implemented a set of recommendations made by a previous technical assistance mission in May 2022 which were aimed at improving the solvency stress model of the Superintendency of Banks, Panama (SBP). The mission also provided training on the design...

Recently, there has been a growing focus on sustainability issues within the financial sector. However, quantitative analysis of social and governance aspects has been challenging due to difficulties in data modelling. With the recent regulatory updates for standardised disclosure, the next step...

This paper proposes an operational approach to stress testing, allowing one to assess the banking sector's vulnerability in multiple plausible macro-financial scenarios. The approach helps identify macro-financial risk factors of particular relevance for the banking system and individual banks...

Climate risk is one of the type of risks in a bank's portfolio which is not fully recognized, and its impact on the future overall risk changes is hidden due to lack of sufficient knowledge at the moment. One of the most common data comes from Network for Greening the Financial System (NGFS)...

The Association of Mutual Funds of India (AMFI), under the direction of the Securities and Exchange Board of India (SEBI), provided open access to various risk parameters with respect to MidCap and SmallCap funds for the first time from February 2024. Our study utilizes AMFI datasets from...

This paper investigates the resilience of non-financial firms in Mongolia against financial distress. Utilizing firm-level financial data from 2013 to 2022, we employed a LASSO variable selection technique and logistic regression analysis to develop a distress prediction model for these firms....

This paper examines the market reaction to the European bank stress test announcement and results release events. Using event study methodology (calculating abnormal returns on a three-day period around the event dates), we find that the market reacts differently between the announcement event...

The Japanese financial system has remained resilient through a series of shocks including the COVID-19 pandemic. Japan's large and globally well-integrated financial system withstood the pandemic shock, aided by strong capital and liquidity buffers and extensive policy support. Credit provision...

The FSAP mission conducted a risk analysis for large insurance companies and retirement funds. Building on the narrative of the adverse macrofinancial scenario also used in the banking ST, the focus of the analysis in the insurance sector was on solvency. Sensitivity analyses, e.g., interest...

This paper presents a technical note on bank stress testing and climate risks analysis in Maldives. Although the Maldives' economy has rebounded strongly from the pandemic-induced contraction, macro and financial vulnerabilities remain. The stress test results broadly corroborated the identified...

This study assesses euro area banks' profitability using granular stress test data from three EU-wide exercises, coordinated by the European Banking Authority, that took place in 2016, 2018, and 2021. We propose a credit portfolio-level risk-adjusted return on assets for the euro area as a whole...

In 2020, the European Banking Authority (EBA) launched a public consultation on future changes to the European Union wide stress test (EUWST). The EBA proposes a dual approach across four broad criteria of relevance, comparability, transparency, and cost efficiency: a supervisory leg as the...

The Luxembourg financial system is highly interconnected, diverse and complex. It has displayed a high level of resilience in the past but currently faces a backdrop of heightened economic, financial, and geopolitical uncertainty. Investment funds have grown since the 2017 FSAP, while their...