The credit risk macro stress testing of the Chinese banking system

In this study, we investigate the link between default loans and macroeconomic and bank-specific variables to assess exposure of Islamic banks to credit risks, and then design stress testing scenarios to assess the banking system’s resilience to adverse shocks. The results suggest that credit risk exposure of Islamic banks in Sudan is mainly affected by bank-specific variables, which include changes in total assets, total deposits, and total loans; all of them have a negative and significant impact on the probability of default loans. The study also indicates that the macroeconomic variables, which include growth of domestic product, change in exchange rate premium, and change in money supply, have positive but insignificant effects on the risk of default loans. The study concludes by pointing out that the Islamic banking system in Sudan is more vulnerable to bank-specific risk exposure rather than macroeconomic indicators.

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Macro Stress Testing Credit Risk: Case of Madagascar Banking Sector

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2020-0020 ◽

2020 ◽

Vol 9 (2) ◽

pp. 199-218 ◽

Cited By ~ 1

Author(s):

Miora Rakotonirainy ◽

Jean Razafindravonona ◽

Christian Rasolomanana

Keyword(s):

Credit Risk ◽

Stress Testing ◽

Banking Sector ◽

Stress Test ◽

Banking System ◽

System Level ◽

Risk Indicator ◽

Macroeconomic Shocks ◽

Vector Autoregressive ◽

Risk Equation

AbstractThis study proposes to assess the vulnerability of banking sector’s credit portfolio under macroeconomic shocks and to evaluate its impact on banking system capitalization. Our method uses the Global Vector Autoregressive (GVAR) Model to generate adverse macroeconomic scenarios. The GVAR model is combining by the satellite credit risk equation to find the non-performing loan under stress conditions. The advantage of using GVAR model is that on the one hand, it captures the transmission of global, external and domestic macroeconomic shocks on banks non-performing loans. On the other hand, this model considers the nonlinear pattern between business cycle and the bank credit risk indicator during the extreme events as highlighting by the macro stress test literature. The forecast of non-performing loan is then used to obtain stress projections for capital requirement for the banking system level. This article attempts to fill the lacks concerning the stress testing works about Madagascar which study is a recent framework, whose no study on dynamic macro stress testing was treated before. The Results outline the interaction of aggregate non-performing loan with macroeconomic evolution. The horizon of capital prediction shows that banking sector reacts most to a GDP shock. Also, Madagascar banking sector is quite resilient and remains sufficiently capitalized under all macroeconomic scenarios designed with a solvency ratio higher than the minimum regulatory CAR ratio.

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Stress-testing Russian Banking System: Will Banks Need Government Assistance Again?

Voprosy Ekonomiki ◽

10.32609/0042-8736-2010-4-61-81 ◽

2010 ◽

pp. 61-81 ◽

Cited By ~ 3

Author(s):

O. Solntsev ◽

A. Pestova ◽

M. Mamonov

Keyword(s):

Stress Testing ◽

Banking Sector ◽

Stress Test ◽

Banking System ◽

Government Assistance ◽

Methodological Issues ◽

Loan Portfolio ◽

Macroeconomic Indicators ◽

Remote Stress ◽

Capital Injections

The article analyzes factors that affect growth of the share of non-performing loans in the loan portfolio of Russian banks and proposes approaches for this share forecasting on the basis of dynamics of macroeconomic indicators. It also deals with methodological issues of remote stress-test of lending agencies. Using the results of conducted stress-test of Russian banks the authors assess their perspective capital needs in 2010 and estimate the share of government assistance in capital injections. Furthermore, the authors define the scale of vulnerable banks groups in the Russian banking sector.

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