Author : Mr.Eugenio Cerutti
Publisher : International Monetary Fund
ISBN 13 : 1475519052
Total Pages : 21 pages
Book Rating : 4.4/5 (755 download)
Book Synopsis The Need for "Un-consolidating" Consolidated Banks' Stress Tests by : Mr.Eugenio Cerutti
Download or read book The Need for "Un-consolidating" Consolidated Banks' Stress Tests written by Mr.Eugenio Cerutti and published by International Monetary Fund. This book was released on 2012-12-06 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent crisis has spurred the use of stress tests as a (crisis) management and early warning tool. However, a weakness is that they omit potential risks embedded in the banking groups’ geographical structures by assuming that capital and liquidity are available wherever they are needed within the group. This assumption neglects the fact that regulations differ across countries (e.g., minimum capital requirements), and, more importantly, that home/host regulators might limit flows of capital or liquidity within a group during periods of stress. This study presents a framework on how to integrate this risk element into stress tests, and provides illustrative calculations on the size of the potential adjustments needed in the presence of some limits on intragroup flows for banks included in the June 2011 EBA stress tests.