scholarly journals Stress-testing as a method of macroprudential policy and information security in banking sector

2019 ◽  
Vol 65 ◽  
pp. 06004
Author(s):  
Olena Berezina ◽  
Iryna Honcharenko ◽  
Lesya Berezhna ◽  
Valentina Kunchenko-Kharchenko
Keyword(s):  
Integrated Assessment ◽  
Financial Stability ◽  
Stress Testing ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Quantitative Risk Assessment ◽  
Macroprudential Policy ◽  
Prudential Policy ◽  
Integral Indicator

The article contains an overview of the essence, history, components, scenarios, methodology and results of stress testing of the Ukrainian banking system. The purpose of this paper is to explore and analyze existing approaches to stress testing as a method of macro-prudential policy of the Central Bank, to determine the results of quantitative risk assessment and financial stability of banks and their readiness to have sufficient capital to cover losses in various macroeconomic scenarios, as well as to develop a model of integrated assessment and rating of banks based on the results of stress testing. In order to summarize the results of the study, a model of integrated assessment was developed and a rating of banks was built based on the analysis of their financial stability, capital adequacy and readiness to withstand the crisis. To solve the problem of qualitative analysis of the stress-testing results in terms of a significant number of indicators and calculations a simulation of the integral indicator is proposed which helps information users group the data, obtain a generalized assessment and form a rating of banks according to the financial stability reserve.

Maintaining Financial Stability in the Banking Sector

2019 ◽  
pp. 30-48
Author(s):  
Meltem Gurunlu
Keyword(s):  
Risk Management ◽  
Management System ◽  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Basel Accords ◽  
Risk Management System ◽  
Strategic Approach ◽  
Global World

Maintaining financial stability in the banking sector through a well-functioning risk management system is a strategic approach in today's global world where the risks have become much more diversified than ever. This chapter was undertaken in order to investigate the risk management topic by focusing on the experiences learned from the banking crises up-to-date and implications of the Basel Accords which outlined capital adequacy standards to prevent such crises. With paying special attention to the case of Turkish banking system, main challenges and possible solutions are also discussed.

scholarly journals Financial Sustainability Assessment of the Largest Systemically Important Credit Institutions in the Context of the Global Instability

2021 ◽  
Vol 12 (2) ◽  
pp. 10
Author(s):  
Oksana V. Savchina ◽  
Ekaterina A. Sidorina ◽  
Olga V. Savchina ◽  
Petr S. Shcherbachenko
Keyword(s):  
National Economy ◽  
Financial Stability ◽  
Banking Sector ◽  
Sustainability Assessment ◽  
Banking System ◽  
Capital Adequacy ◽  
Business Strategies ◽  
Financial Sustainability ◽  
Management Efficiency ◽  
Asset Quality

The national banking system is the driver for the national economy that unites various types of credit organizations that operate within a single monetary mechanism. The banking system is a part of the economic “organism”, whose condition determines the stable development of society. The problems that currently exist in the banking sector reflect instability of the entire economic situation in the country. The reasons are a reduction in budget support for organizations and the inability of some of them to adapt to changing external conditions. In crisis conditions, it is of particular interest to assess the financial sustainability of the activity of the largest systemically important banks in the country, which are the “circulatory system” of the national economy. This article assesses the financial stability of PJSC “Sberbank of Russia” based on an analysis of the main groups of its performance indicators for 2007-2019: capital adequacy, asset quality, management efficiency, profitability and liquidity. According to the research results, it is revealed that during the period under review, the activity of Sberbank is stable with respect to such indicators as capital adequacy, profitability, management efficiency and liquidity. Bank activity is unstable relative to asset quality indicators. The high value of the asset quality ratio characterizes the increased degree of riskiness of operations conducted. The ratio of overdue debt is above the norm, which adversely affects the financial stability of the bank. The most important achievement of Sberbank of Russia in 2019 - the launch of a new digital platform of the bank. The use of artificial intelligence technologies has already become an important driver of Sberbank business. Due to the pandemic of COVID-19, the Russian banking sector may face a number of problems. By 2021-2022, the growth is expected only by those banks that will build an effective risk management system and will be able to adapt their business strategies to the new economic realities and tougher requirements of the regulator.

scholarly journals Stress Testing of the Montenegrin Banking System with Aggregated and Bank-Specific Data

2014 ◽  
Vol 3 (2) ◽  
pp. 85-119
Author(s):  
Sanja Vuković
Keyword(s):  
Stress Testing ◽  
Management Practices ◽  
Banking Sector ◽  
Stress Test ◽  
Banking System ◽  
Capital Adequacy ◽  
Loan Loss ◽  
Aggregated Data ◽  
Loan Loss Provision ◽  
Capital Adequacy Ratio

Abstract There are many different approaches to the process of stress testing and two of them will be investigated in this paper. The first one is a stress test performed on aggregated data i.e. the banking system as a whole. The variable of interest in both exercises is the Loan Loss Provision ratio (hereinafter: the LLP). The main goal of the thesis is to find an answer to the following question: what are the macroeconomic variables that influence LLP the most and how will LLP, as a variable of interest, behave in a situation when all these variables were to experience negative performance at the same time? The resilience of the banking system to such scenario will be tested through the capital adequacy ratio. In order to find out more about the management practices of banks, microlevel data on banks were also used in the analysis. The focus was to see which of the variables are able to explain the LLP ratio for each bank individually and how is this information helpful for possible improvements in the banking sector. The relations between these variables will be able to explain some of the banks’ losses and some of the banks’ practices regarding credit activities. The analysis there will provide for some recommendations for the banks but also for the Central Bank and its way to influence the practices in the banking sector.

scholarly journals Methodological Aspects of the Financial Stability of Iraq’s Banking System

2020 ◽  
pp. 208-218
Author(s):  
Haider H. Dipheal Shubbar ◽  
Keyword(s):  
Central Bank ◽  
Financial Distress ◽  
Financial Stability ◽  
Banking Sector ◽  
System Development ◽  
Banking System ◽  
Capital Adequacy ◽  
Financial Monitoring ◽  
High Level ◽  
Methodological Aspects

This article discusses the methodology the Central Bank of Iraq developed to assess the financial stability of commercial banks. This topic is relevant because, in modern economic conditions, the Central Bank of Iraq is forced to tighten requirements to credit institutions. Banks use not only their own funds, but also the funds of the population, legal entities, so they must be reliable and stable. Financial stability directly characterises the reliability of banks, so it must be strictly controlled. The Central Bank of Iraq has created its own methodology for assessing the financial stability of the banking sector. Its use should improve the quality of the created banking system development strategies and the financial monitoring of these strategies’ implementation. The Iraqi banking sector has a high level of capital adequacy, which helps to reduce the likelihood of financial distress in it.

scholarly journals MACROPRUDENTIAL STRESS-TESTING THE INDONESIAN BANKING SYSTEM USING THE CREDIT RISK MODEL

2020 ◽  
Vol 23 (1) ◽  
pp. 121-138
Author(s):  
Shilvia Kurniawati ◽  
Deddy Priatmodjo Koesrindartoto
Keyword(s):  
Stress Testing ◽  
Banking Sector ◽  
Risk Model ◽  
Stress Test ◽  
Banking System ◽  
Capital Allocation ◽  
Capital Adequacy ◽  
Capital Adequacy Ratio ◽  
One Year ◽  
Credit Risk Model

This study implements a macroprudential stress test and develops the EconomicRisk Weighted-Capital Adequacy Ratio (ERW-CAR) to evaluate the resilience of theIndonesian banking sector. The results show that the historical and one-year aheadpredicted ERW-CARs are currently three percent lower than the Indonesia regulatoryCAR, and continue to decrease by nearly two percent following an exchange rate shock.However, the capital adequacy requirement stands above the eight percent thresholdand the banks are still able to optimize their capital allocation.

scholarly journals Macroprudential Policy and Financial Stability: The Turkish Case

2018 ◽  
Vol 10 (2) ◽  
pp. 34
Author(s):  
Ilyas Siklar ◽  
Aysegül Akça
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Foreign Currency ◽  
Banking System ◽  
Policy Instrument ◽  
Money Market ◽  
Estimation Model ◽  
Macroprudential Policy ◽  
Leverage Ratio ◽  
Macroprudential Policies

This study aims to analyse the relationship between financial stability and macroprudential policies in Turkey and investigate the effectiveness of macroprudential policies on the financial stability by using the vector error correction model (VECM). Estimates are realized for the 2010-2017 period by using the monthly data. For this purpose, a composite financial stability indicator (FSI) is formed and an estimation model is developed. Banking sector credit concentration, net position of interbank money market, leverage ratio, capital buffers, reserve requirements and foreign currency loan limits are used as macroprudential policy indicators. According the results obtained from VECM model, the ratios which represent concentration of credit and capital buffer provide a favourable contribution to financial stability while the variables representing the leverage ratio and the net position of banking system in interbank money market negatively affect the financial stability. The study concludes that monetary policy should be supported by macroprudential policy instrument to achieve financial stability.

Methodology and Practical Implementation of Macroprudential Stress Testing of the Banking System

2017 ◽  
Vol 2017 (1) ◽  
pp. 123-146
Author(s):  
Ekaterina Suchkova ◽  
Kseniya Masterovenko
Keyword(s):  
Financial Stability ◽  
Stress Testing ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Empirical Studies ◽  
Banking System ◽  
Practical Implementation ◽  
Scientific Methods ◽  
The Us ◽  
Analysis And Synthesis

The article reviews the methodological basis of macroprudential stress-testing used as a quantitative tool to analyze and forecast financial stability. This tool has been actively used by regulators world wide especially after the 2007-2008 global financial crisis. We analyze the experience of macroprudential stress-testing of the US and EU banking sector with a particular focus on the Bank of Russia methodology. Using general scientific methods of analysis and synthesis of literature, the authors examine various aspects of macroprudential stress-testing. The result of this work is a review of empirical studies on macroprudential stress-testing and the analysis of its practical implementation in Russia and abroad.

Strategies of Russian Banks in the Context of Economic Sanctions and the Pandemic Shock

2021 ◽  
Vol 27 (4) ◽  
pp. 304-310
Author(s):  
O. L. Bezgacheva ◽  
V. N. Samotuga
Keyword(s):  
Central Bank ◽  
Russian Federation ◽  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Equity Capital ◽  
Capital Adequacy ◽  
Russian Government ◽  
Capital Adequacy Ratio ◽  
The Russian Federation

Aim. The presented study aims to examine measures taken by the Russian government, actions of the Central Bank of the Russian Federation (CBR, Bank of Russia), and strategies of banks in the context of continuing anti-Russian sanctions and the coronavirus pandemic while also assessing whether they are sufficient to strengthen the country’s banking system.Tasks. The authors determine what measures are taken by the Central Bank of the Russian Federation to maintain the financial stability of the banking sector and an acceptable equity capital adequacy ratio; analyze the strategies of banks and the way they are adjusted in the context of sanctions and the pandemic; show the role of subordinated bonds as a source of the banks’ own funds.Methods. This study uses general scientific methods of cognition to analyze the problems of the banking system as well as the policy of the Central Bank of the Russian Federation and the Russian government aimed at overcoming the recession and maintaining financial stability in the banking sector.Results. As a result of unconventional decisions taken by the Central Bank of the Russian Federation, the total assets of the banking sector exceeded the pre-crisis level by the beginning of this year. Optimistic forecasts indicate that banks are adapting to changing conditions, adjusting their strategies accordingly.Conclusions. The Russian banking system passed the endurance test during the pandemic, generally maintaining an acceptable capital adequacy ratio. Due to large-scale government support, the economic decline in Russia has slowed down, and there are signs of recovery growth. Banks entered 2021 with an obvious headstart. Almost all banks in the top 200 made a profit.

scholarly journals Assessment of the banking system financial stability based on the differential approach

2018 ◽  
Vol 13 (3) ◽  
pp. 120-133 ◽  
Author(s):  
Anzhela Kuznyetsova ◽  
Nataliya Pogorelenko
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Banking Sector ◽  
Dynamic Change ◽  
Banking System ◽  
Stability Index ◽  
Capital Adequacy ◽  
Financial Risks ◽  
Differential Approach ◽  
Multiplicative Convolution

In this paper, the banking system financial stability is assessed based on the differential approach. The differential approach provides for taking into account the specificity of the banking system structural organization (from the standpoint of the central bank and the second-level banks) and the sets of financial stability indicators, different in terms of their structure, and their volatility measures, according to this approach.The banking system financial stability is assessed based on the two groups of indicators: the first one characterizes the central bank financial stability (indicators of gross international reserves, effectiveness of monetary policy and foreign exchange regulation, ability to create favorable conditions in order to ensure the effectiveness of the banking sector); the second one defines the financial stability level for state banks, banks with private and foreign capital (indicators of the capital adequacy, liquidity, structure of assets and liabilities, effectiveness of the activity, financial risks). The differences between the sets of financial stability indicators for different groups of banks and the expediency of taking them into account during the assessment are revealed and substantiated according to the results of using the principal components method.The developed procedure of assessing the banking system financial stability provides for: constructing the banking system financial stability index (by multiplicative convolution of central bank financial stability subindex and three banks’ financial stability subindices); defining its high, medium and low level according to its quantitative values (according to interval scales, developed according to the rule “3σ”; interpreting the assessment results based on the scenario analysis, which is based on taking into account the dynamic change of the financial stability index during the analyzed period and allows to identify the state of the banking system (stable, conventionally stable or critical).

scholarly journals A financial Stability Index for Jordan

2021 ◽  
Vol 10 (2) ◽  
pp. 157-178
Author(s):  
Samer A.M. AL-Rjoub
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Composite Index ◽  
Banking System ◽  
Stability Index ◽  
Capital Adequacy ◽  
Economic Conditions ◽  
Policy Makers ◽  
Monetary Stability ◽  
The Impact

Abstract Financial stability is an important part of the Central Bank of Jordan (CBJ) role in parallel with maintenance of monetary stability. The impact of the global financial crises from 2007-2009 and the economic slowdown has left the Jordanian banking sector in a generally weaker position than before. This paper constructs an index of financial stability of the Jordanian banking sector that will adequately reflects the effects of the crises in 2008-2009 and measure the resilience of the banking sector against negative shocks. The index is based on the aggregation of the fifteen announced soundness indicators into four main categories: (i) Capital Adequacy, (ii) Earnings and Profitability, and (iii) liquidity to build one aggregate composite index. Using two weighting schemes the Financial Stability Index (FSI) proved to be a good indicator of banking reactions to shocks and changing economic conditions. FSI is intuitively attractive as it could enable policy makers to better monitor the banking sector’s resilience to shocks and can help further in anticipating the sources and causes of financial stress to the system. The index of financial stability of the banking sector in Jordan shows that the banking system has been consciously resilient against shocks and negative economic conditions.

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