Financial System Stress Tests, Presented by Hononhan

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Financial System Stress Tests

Seminar on Financial Stability and Development

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OverviewOverview

I.I. Stress tests in FSAPsStress tests in FSAPs

II.II. Stress tests in central banks & banking supervisory Stress tests in central banks & banking supervisory agenciesagencies

III.III. Selected methodological issuesSelected methodological issues

IV.IV. Recent developments in stress test methodologyRecent developments in stress test methodology

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Stress Tests in FSAPsStress Tests in FSAPs

Part I

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Defining Stress TestsDefining Stress Tests

Stress testsStress tests = a set of statistical techniques to help assess the = a set of statistical techniques to help assess the vulnerability of financial institutions & financial systems to vulnerability of financial institutions & financial systems to exceptional but plausibleexceptional but plausible events events

Defining Defining exceptional but plausibleexceptional but plausible

– Against a specific historical scenarioAgainst a specific historical scenario

– Hypothetical scenario based on the analysis of past Hypothetical scenario based on the analysis of past volatility and correlationsvolatility and correlations

– Other methodsOther methods

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Types of Stress TestsTypes of Stress Tests

By aggregationBy aggregation

IIndividual exposuresndividual exposures

Individual institutionsIndividual institutions

System-wideSystem-wide

– on bank by bankon bank by bank** data data(“bottom up”)(“bottom up”)

– on aggregate dataon aggregate data(“top down”)(“top down”)

By methodologyBy methodology

Sensitivity analysisSensitivity analysis

Scenario analysisScenario analysis

Contagion analysisContagion analysis

* Most system-wide stress tests so far have been on banks. Thus, focus on banks and the * Most system-wide stress tests so far have been on banks. Thus, focus on banks and the banking sector here. Nonetheless, the issue of Stress tests for nonbank financial institutions banking sector here. Nonetheless, the issue of Stress tests for nonbank financial institutions will also be discussed.will also be discussed.

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Recent Experience with Stress TestsRecent Experience with Stress Tests

Financial crisis of late 1990sFinancial crisis of late 1990s

– More focus on financial sector risksMore focus on financial sector risks

– Balance sheetBalance sheet approach approach

Increasing interest in stress tests as a resultIncreasing interest in stress tests as a result

– Financial institutions (BIS surveys in 2000 & 2004)Financial institutions (BIS surveys in 2000 & 2004)

– Supervisory agencies & central banksSupervisory agencies & central banks

– International institutions: IMF, World BankInternational institutions: IMF, World Bank

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Stress Tests in the FSAPStress Tests in the FSAP

Stress tests a crucial tool in the quantitative assessments in Stress tests a crucial tool in the quantitative assessments in FSAPsFSAPs

Stress tests tailored to country-specific circumstances Stress tests tailored to country-specific circumstances (complexity of the financial system, data availability)(complexity of the financial system, data availability)

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Stress Tests as a Multi-Stage ProcessStress Tests as a Multi-Stage Process

1.1. IIdentify macroeconomic & market risksdentify macroeconomic & market risks

2.2. IIdentifdentifyy major exposures major exposures

3.3. DDefine coverageefine coverage

4.4. Identify data requiredIdentify data required

5.5. CCalibrate shocks (or scenarios)alibrate shocks (or scenarios)

6.6. SSelect & implement methodologelect & implement methodologyy

7.7. IInterpret resultsnterpret results

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Stress Tests vs. Other Analytical ToolsStress Tests vs. Other Analytical Tools

Advantages of stress testsAdvantages of stress tests

– Forward-looking assessment of risksForward-looking assessment of risks

– More precise than analyzing aggregated indicators More precise than analyzing aggregated indicators (NPLs, open positions)(NPLs, open positions)

Disadvantages of stress testsDisadvantages of stress tests

– Robustness with respect to assumptions?Robustness with respect to assumptions?

– Banks viewed as static portfolios rather than as dynamic unitsBanks viewed as static portfolios rather than as dynamic units

– Role of non-quantitative factors?Role of non-quantitative factors?

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Other Analytical Methods Other Analytical Methods Complement Stress TestsComplement Stress Tests

Macroprudential analysisMacroprudential analysis

– Financial Soundness Indicators (FSIs)Financial Soundness Indicators (FSIs)

– Links between FSIs and other factors, especially the macroeconomic Links between FSIs and other factors, especially the macroeconomic frameworkframework

Analysis of qualitative informationAnalysis of qualitative information

– Legal, regulatory, accounting, tax conditionsLegal, regulatory, accounting, tax conditions

– Corporate governanceCorporate governance

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Evolving Role of Stress Tests in FSAPEvolving Role of Stress Tests in FSAP

Most missions: single-factor sensitivity analysis based on Most missions: single-factor sensitivity analysis based on historical extremeshistorical extremes

More recent FSAP missionsMore recent FSAP missions

– More focus on scenario analysisMore focus on scenario analysis

– Active involvement of the authoritiesActive involvement of the authorities

– Industrial countries: bank internal stress test models, authorities’ Industrial countries: bank internal stress test models, authorities’ macroeconomic models, inclusion of interbank contagion riskmacroeconomic models, inclusion of interbank contagion risk

– Inclusion of nonbank financial institutions in some casesInclusion of nonbank financial institutions in some cases

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Stress Tests in Central Banks & Stress Tests in Central Banks & Banking Supervisory AgenciesBanking Supervisory Agencies

Part II

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Role of Stress Tests Role of Stress Tests

Help focus supervisory processes on a risk basisHelp focus supervisory processes on a risk basis

Support macroprudential analysis at the central banks Support macroprudential analysis at the central banks (including in financial stability reports)(including in financial stability reports)

Assess effects of prospective policy changesAssess effects of prospective policy changes

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Stress Tests Conducted by Stress Tests Conducted by Central Banks & Banking SupervisorsCentral Banks & Banking Supervisors

Bank-by-bank stress tests conducted by supervisorsBank-by-bank stress tests conducted by supervisors

Financial system stability reports include or refer to aggregate Financial system stability reports include or refer to aggregate stress testsstress tests

Range of approaches – examples:Range of approaches – examples:

– Hungary (focus on sensitivity calculations)Hungary (focus on sensitivity calculations)

– Norway (focus on sources of credit risk)Norway (focus on sources of credit risk)

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Implementation IssuesImplementation Issues

1.1. Coverage – institutionsCoverage – institutions

2.2. Coverage – exposuresCoverage – exposures

3.3. Methodology Methodology

4.4. OrganizationOrganization

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Coverage - InstitutionsCoverage - Institutions

From systemic stability perspective, important to cover a From systemic stability perspective, important to cover a significant part of the system, but not all institutionssignificant part of the system, but not all institutions

But for supervisory purposes, it might be useful to increase the But for supervisory purposes, it might be useful to increase the coveragecoverage

Coverage of foreign banks (branches, subsidiaries, exposures Coverage of foreign banks (branches, subsidiaries, exposures to foreign banks)to foreign banks)

Consolidation (consistency across time, inclusion of non-bank Consolidation (consistency across time, inclusion of non-bank financial institutions)financial institutions)

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Coverage - ExposuresCoverage - Exposures Basic exposures to be includedBasic exposures to be included

– Credit risk (incl. indirect FX & interest rate risks)Credit risk (incl. indirect FX & interest rate risks)

– Direct interest rate riskDirect interest rate risk

– Direct FX riskDirect FX risk

Other exposures to be consideredOther exposures to be considered

– Interbank contagion riskInterbank contagion risk

– Equity and/or real estate price riskEquity and/or real estate price risk

– Later: liquidity, concentration risksLater: liquidity, concentration risks

Include on- & off-balance sheet exposuresInclude on- & off-balance sheet exposures

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MethodologyMethodology Both sensitivity and scenario analysisBoth sensitivity and scenario analysis

Scenario analysis: a combination of historical and hypothetical Scenario analysis: a combination of historical and hypothetical scenariosscenarios

For the hypothetical scenarios, justification using For the hypothetical scenarios, justification using macroeconomic models (see later)macroeconomic models (see later)

A mix of A mix of top downtop down & & bottom upbottom up

– Factors: computation difficulty, confidentialityFactors: computation difficulty, confidentiality

– Most calculations typically bank-by-bank, but model estimates on Most calculations typically bank-by-bank, but model estimates on aggregate basisaggregate basis

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MethodologyMethodology Expressing the impact: in terms of capital adequacy (Expressing the impact: in terms of capital adequacy (pre-pre-shock shock

vs. post-shock); in terms of liquidity for liquidity stress testvs. post-shock); in terms of liquidity for liquidity stress test

Impact measured over what period?Impact measured over what period?

– Typically one year (ideally, NPV of future impact)Typically one year (ideally, NPV of future impact)

Treatment of profitsTreatment of profits

– A prudent assumption based on the pastA prudent assumption based on the past

– An autonomous shock to non-interest income or net interest income An autonomous shock to non-interest income or net interest income (on top of other shocks)(on top of other shocks)

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OrganizationOrganization How frequently?How frequently?

– Standard set of tests on quarterly basis, market risk/sensitivity Standard set of tests on quarterly basis, market risk/sensitivity analysis more frequently, elaborate analysis (e.g. contagion) less analysis more frequently, elaborate analysis (e.g. contagion) less frequentlyfrequently

Run by whom?Run by whom?

Which software?Which software?

– Many start with Excel and E-Views, then integrate with Many start with Excel and E-Views, then integrate with supervisory information systemssupervisory information systems

Presentation, dissemination of the resultsPresentation, dissemination of the results

– By bank (supervision; links with EWS)By bank (supervision; links with EWS)– By peer groups (macroprudential surveillance)By peer groups (macroprudential surveillance)

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Selected Methodological IssuesSelected Methodological Issues

Part III

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Selected Methodological IssuesSelected Methodological Issues1.1. Selecting macroeconomic scenariosSelecting macroeconomic scenarios

2.2. Foreign exchange (FX) riskForeign exchange (FX) risk

3.3. Interest rate riskInterest rate risk

4.4. Credit riskCredit risk

5.5. Interbank contagion riskInterbank contagion risk

6.6. Liquidity riskLiquidity risk

7.7. Equity price & real estate price riskEquity price & real estate price risk

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Macro Scenarios for Stress TestsMacro Scenarios for Stress Tests Historical scenariosHistorical scenarios

– e.g. the 1997 turbulence and subsequent slowdown in East Asiae.g. the 1997 turbulence and subsequent slowdown in East Asia

Hypothetical scenariosHypothetical scenarios

– Recognizing the limitations of macro models, especially for large Recognizing the limitations of macro models, especially for large shocks, would it be possible to use the central bank’s existing macro shocks, would it be possible to use the central bank’s existing macro model?model?

– Stochastic simulations based on the model?Stochastic simulations based on the model?

Scenario design: relative sizes of shocks to the risk factors Scenario design: relative sizes of shocks to the risk factors Assessing likelihood of the scenariosAssessing likelihood of the scenarios

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Worst CaseWorst Case vs. vs. ThresholdThreshold Approach Approach

Shock to risk factor 2

Shock to risk factor 1 CAR=0%

CAR=8%

CAR=10% p=1%

p=2% p=5%

A B

C

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Controversy on ProbabilityControversy on Probability

Stress test scenarios should not be attached any probability Stress test scenarios should not be attached any probability measure, ST is different from the standard risk-modeling measure, ST is different from the standard risk-modeling toolkit (e.g., Kupiec, 2001)toolkit (e.g., Kupiec, 2001)

Stress test scenarios need to be attached an explicit Stress test scenarios need to be attached an explicit

probability measure; otherwise they are useless (e.g., probability measure; otherwise they are useless (e.g., Berkowitz, 1999) Berkowitz, 1999)

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Controversy on ProbabilityControversy on Probability

Practical solutionsPractical solutions

– Base stress test on extreme historical scenarioBase stress test on extreme historical scenario

– Relate stress test to extreme historical scenarioRelate stress test to extreme historical scenario

– Use Use threshold approachthreshold approach with extreme thresholds with extreme thresholds (useful when exposures negligible: (useful when exposures negligible: proof by contradictionproof by contradiction))

– Combine historical scenario with hypothetical assumptions Combine historical scenario with hypothetical assumptions ((robustness analysisrobustness analysis))

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Foreign Exchange RiskForeign Exchange Risk

The standard sensitivity analysisThe standard sensitivity analysis

Note: C=capital, ANote: C=capital, ARWRW=risk-weighted assets, F=net open position, e=exchange rate=risk-weighted assets, F=net open position, e=exchange rate

The impact on capital adequacy roughly equals the shock The impact on capital adequacy roughly equals the shock times the open position…times the open position…

RW

RW

RWRW

RWRW

RW

A

C

C

A

A

C

C

F

eAeF

C

ACA

eF

e

eAeC1

1)](/)([2

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Foreign Exchange RiskForeign Exchange Risk

... but stress test must reflect non-linearity arising from ... but stress test must reflect non-linearity arising from FX optionsFX options

Off-balance sheet (OBS) positions, which include Off-balance sheet (OBS) positions, which include options, are not negligible in many countries. options, are not negligible in many countries. ExampleExample

Net FX position/capitalNet FX position/capital (%)  (%)  19981998 19991999 20002000 20012001 20022002 Jan-03Jan-03

... w/o OBS items... w/o OBS items 34.234.2 58.858.8 55.655.6 77.577.5 25.925.9 14.714.7

... with OBS items... with OBS items 40.040.0 18.918.9 25.225.2 13.113.1 -49.8-49.8 -26.8-26.8

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Indirect FX RiskIndirect FX Risk

Nonperforming loans vs. exchange rateNonperforming loans vs. exchange rate

Usually much more significant than the direct FX riskUsually much more significant than the direct FX risk

The analysis requiresThe analysis requires

– Regression of leverage vs. NPLsRegression of leverage vs. NPLs

– Inclusion of stock and flow exposures in FXInclusion of stock and flow exposures in FX

c

c

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ccc E

D

E

Da

E

F

e

eeEeDaTLNPL )](/)([)/(

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Interest Rate RiskInterest Rate RiskDuration is the key indicator, becauseDuration is the key indicator, because

This allows to express changes in capital adequacy ratio asThis allows to express changes in capital adequacy ratio as

wherewhere

)1()(

)(,

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Interest Rate Risk—IssuesInterest Rate Risk—Issues Adequacy of the available data, includingAdequacy of the available data, including

– Do banks report residual maturity properly?Do banks report residual maturity properly?– Does the indicator capture the whole balance sheet?Does the indicator capture the whole balance sheet?– Are off-balance sheet contracts included?Are off-balance sheet contracts included?

Simplified method: residual maturity plus weigths proposed Simplified method: residual maturity plus weigths proposed by by Basel CommitteeBasel Committee

Nonlinearity Nonlinearity (duration changes with large changes in interest rates)(duration changes with large changes in interest rates)

NPV may differ from the regulatory capitalNPV may differ from the regulatory capital

Correlation between risk-weighted assets and assets Correlation between risk-weighted assets and assets

Indirect interest rate risk (see under credit risk)Indirect interest rate risk (see under credit risk)

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Credit Risk ModelingCredit Risk Modeling

The most significant source of riskThe most significant source of risk

Also, the most in need of strengtheningAlso, the most in need of strengthening

1.1. Mechanical approachesMechanical approaches

2.2. Approaches based on corporate sector data Approaches based on corporate sector data (leverage, interest coverage) & possibly household sector data(leverage, interest coverage) & possibly household sector data

3.3. Approaches based on loan performance data Approaches based on loan performance data (including the VAR model already estimated)(including the VAR model already estimated)

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1. Mechanical Approaches1. Mechanical Approaches

Assume an inflow of new NPLsAssume an inflow of new NPLs

– Function of existing NPLs, performing loans, or a weighted sum of Function of existing NPLs, performing loans, or a weighted sum of the twothe two

Assume ↑ provisions on existing NPLsAssume ↑ provisions on existing NPLs

– Increase in provisioning ratesIncrease in provisioning rates– Credit migration within NPLs (“transition matrix”)Credit migration within NPLs (“transition matrix”)

Credit expansion model: inflow of new loans, followed by Credit expansion model: inflow of new loans, followed by credit migration to and within NPLscredit migration to and within NPLs

Do the above by sectors (e.g. corporate & household)Do the above by sectors (e.g. corporate & household)

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2. Data on Borrowers2. Data on Borrowers

Leverage vs. NPLs (a possible model) *Leverage vs. NPLs (a possible model) *

Top-down calculationsTop-down calculations

* * Notes: Based on an actual model used by IMF staff for cross-country panel data estimates. Npls – ratio of non-performing loans to total loans, lev – leverage ratio, rcc – real cost of capital, reer – real effective exchange rate, y-hat – real GDP growth rate, p-hat – inflation rate, m-hat – growth rate of M1, d-hat – growth rate of domestic credit, roe – corporate sector return on equity

rccmpyreerlevnpls 5443210 ˆˆˆ

reerroedpyrccnpllev 76543210ˆˆˆ

mylevrcc ˆˆ 3210

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2. Data on Borrowers2. Data on Borrowers

Logit model predicting individual bankruptcy probabilities as a Logit model predicting individual bankruptcy probabilities as a function of age, size, industry characteristics & corporate function of age, size, industry characteristics & corporate soundness indicators (earnings, liquidity, financial strength)soundness indicators (earnings, liquidity, financial strength)

Include interest and exchange rates on the right hand side (to Include interest and exchange rates on the right hand side (to capture the indirect risk)capture the indirect risk)

Link to individual banks through their exposures to the various Link to individual banks through their exposures to the various groups of companiesgroups of companies

Predict bank potential losses Predict bank potential losses (also taking into account collateral)(also taking into account collateral)

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2. Data on Borrowers2. Data on Borrowers

A simpler approach: exposure variablesA simpler approach: exposure variables

– Net open FX position & ratio of FX income to FX costs (for indirect FX Net open FX position & ratio of FX income to FX costs (for indirect FX risk)risk)

– Interest coverage (for indirect interest risk)Interest coverage (for indirect interest risk)

If exposure variable exceeds an estimated (assumed) threshold, If exposure variable exceeds an estimated (assumed) threshold, default rate risesdefault rate rises

Similarly to previous approach, translate to bank losses (after Similarly to previous approach, translate to bank losses (after collateral)collateral)

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3. Loan Performance Data3. Loan Performance Data

AdvantagesAdvantages

– Also available for Also available for household sectorhousehold sector (with rapid lending growth in many countries)(with rapid lending growth in many countries)

– Should be more readily available than leverageShould be more readily available than leverage

DisadvantageDisadvantage

– Lagging indicatorsLagging indicators of asset quality of asset quality

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Introducing Contagion RiskIntroducing Contagion Risk Need to compile data for the following matrixNeed to compile data for the following matrix

Bank 1Bank 1 Bank 2Bank 2 ∙ ∙ ∙ ∙ ∙ ∙ Bank nBank n

Bank 1Bank 1 -- ---- -- Exposure of Exposure of bank 1 to bank 1 to

bank 2bank 2

∙ ∙ ∙ ∙ ∙ ∙ Exposure of Exposure of bank 1 to bank 1 to

bank bank nn

Bank 2Bank 2 Exposure ofExposure ofbank 2 to bank 2 to

bank 1bank 1

-- ---- -- ∙ ∙ ∙ ∙ ∙ ∙ Exposure of Exposure of bank 2 to bank 2 to

bank bank nn

∙∙∙∙∙∙

∙∙∙∙∙∙

∙∙∙∙∙∙

-- ---- -- ∙∙∙∙∙∙

Bank nBank n Exposure of Exposure of bank bank nn to to

bank 1bank 1

Exposure of Exposure of bank bank nn to to

bank 2bank 2

∙ ∙ ∙ ∙ ∙ ∙ -- ---- --

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Introducing Contagion RiskIntroducing Contagion Risk

Exposure = all uncollateralized lending Exposure = all uncollateralized lending (including both on- & off-balance sheet exposures)(including both on- & off-balance sheet exposures)

Currently, only data on total exposure of a bank to interbank Currently, only data on total exposure of a bank to interbank market are availablemarket are available

Two types of the contagion stress testTwo types of the contagion stress test

– ““Pure” contagion test:Pure” contagion test: A “fraud” in a bank; impact on other banks A “fraud” in a bank; impact on other banks through interbank exposuresthrough interbank exposures

– ““Macro” contagion test: Macro” contagion test: Macro shocks are grossed-up to trigger failure Macro shocks are grossed-up to trigger failure of weakest bank; followed by interbank contagionof weakest bank; followed by interbank contagion

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Introducing Contagion RiskIntroducing Contagion Risk Implementation (example for 4 banks)Implementation (example for 4 banks)

Capital adequacy ratio Pi

CAR>=10 0.02 9=<CAR<10 0.05 8=<CAR<9 2 6=<CAR<8 25 4=<CAR<6 50

CAR<4 100

Si’ = (CSi’ = (Cii-E-E1i1i)/(A)/(Aii-E-Ei1i1), ), where where ii=2, 3, and 4.=2, 3, and 4.

SS22’’=(C’’=(C22-E-E1212-P-P33*E*E3232-P-P44*E*E4242)/(A)/(A22-E-E2121-P-P33*E*E2323--PP44*E*E2424))

SS33’’=(C’’=(C33-E-E1313-P-P22*E*E2323-P-P44*E*E4343)/(A)/(A33-E-E3131-P-P22*E*E3232--PP44*E*E3434))

SS44’’=(C’’=(C44-E-E1414-P-P22*E*E2424-P-P33*E*E3434)/(A)/(A44-E-E4141-P-P22*E*E4242--PP33*E*E4343))

... estimate as a part... estimate as a partof the EWS modelof the EWS model

E11 E12 E13 E14

E21 E22 E23 E24

E31 E32 E33 E34

E41 E42 E43 E44

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Aggregate stress test vs. interbank contagion stress test

Second round bank failures triggered by contagion

Aggregate impacts for stress test

output

Matrix of interbank exposures

Failure of individual

banks

Impact on each

bank’s capital ratio

Aggregate stress test

shock

Second round bank failures triggered by contagion

Aggregate impacts for stress test

output

Matrix of interbank exposures

Failure of individual

banks

Impact on each

bank’s capital ratio

Aggregate stress test

shock

Introducing Contagion Risk

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Equity & Real Estate Price RiskEquity & Real Estate Price Risk

Equity price risk—similar to FX riskEquity price risk—similar to FX risk

– Net open positions in equitiesNet open positions in equities

– Need to include off-balance sheet exposuresNeed to include off-balance sheet exposures

Banks’ exposure to real estate price riskBanks’ exposure to real estate price risk

– Direct exposure (investment in real estate)Direct exposure (investment in real estate)

– Credit exposure (developers etc.)Credit exposure (developers etc.)

– Degree of real estate collateralizationDegree of real estate collateralization loan to value ratioloan to value ratio default probability (from credit risk stress test)default probability (from credit risk stress test)

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Concentration Risks (Credit)Concentration Risks (Credit)

Simple example: sensitivity analysis for large exposuresSimple example: sensitivity analysis for large exposures

More sophisticated exampleMore sophisticated example

– Run regressions for default probability on corporate data (company-by-Run regressions for default probability on corporate data (company-by-company), with dummy variables for the sectors/regionscompany), with dummy variables for the sectors/regions

– Ways to define Ways to define default probabilitydefault probability (actual default—run a logit (actual default—run a logit regression; or set a threshold for interest coverage ratio)regression; or set a threshold for interest coverage ratio)

– For a set of a bank’s exposures to sectors/regions, calculate implied For a set of a bank’s exposures to sectors/regions, calculate implied default probabilitydefault probability

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Liquidity RiskLiquidity Risk

Focus on bank liquidity stress testsFocus on bank liquidity stress tests

Results reported off-site, validate during on-site visitsResults reported off-site, validate during on-site visits

Off-site cross-check (sensitivity analysis)Off-site cross-check (sensitivity analysis)

– Overall risk: assume a % of deposits withdrawn Overall risk: assume a % of deposits withdrawn (percentages determined based on past bank runs, vary for different (percentages determined based on past bank runs, vary for different maturities)maturities)

– Concentration risk in deposits Concentration risk in deposits (same as above, but for a percentage of the largest deposits)(same as above, but for a percentage of the largest deposits)

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Recent Developments inRecent Developments inStress Test MethodologyStress Test Methodology

Part IV

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Bank Internal Stress Test ModelsBank Internal Stress Test Models

Two surveys of stress test practices in commercial banks Two surveys of stress test practices in commercial banks (2000 & 2004)(2000 & 2004)

More attention to bank internal stress tests in on-site visitsMore attention to bank internal stress tests in on-site visits

Consider issuing guidelines on stress tests in commercial Consider issuing guidelines on stress tests in commercial banks?banks?

Cross-check results of bank & supervisor stress testsCross-check results of bank & supervisor stress tests

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Stress Tests vs. Early Warning Stress Tests vs. Early Warning SystemsSystems

Consider designing an EWS system in the form of a Consider designing an EWS system in the form of a statistical model of detection of bank failure/stressstatistical model of detection of bank failure/stress

Could be Could be back testedback tested against the ratings against the ratings

BIS working paper on EWS for banking supervisionBIS working paper on EWS for banking supervision

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Cross-Market ContagionCross-Market Contagion

Coverage of non-bank financial institutions in the Coverage of non-bank financial institutions in the framework for consolidated supervisionframework for consolidated supervision

Contagion between banks and non-bank financial Contagion between banks and non-bank financial institutions—e.g. insurance companiesinstitutions—e.g. insurance companies

Credit derivativesCredit derivatives

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Further ReadingFurther Reading Blaschke et al., 2001, “ST of Financial Systems: An Blaschke et al., 2001, “ST of Financial Systems: An

Overview of Issues, Methodologies, and FSAP Overview of Issues, Methodologies, and FSAP Experiences,” IMF WP 01/88Experiences,” IMF WP 01/88– www.imf.org/external/pubs/cat/longres.cfm?sk=15166.

0

IMF & WB, 2003, “Analytical Tools of the FSAP”IMF & WB, 2003, “Analytical Tools of the FSAP”– www.imf.org/external/np/fsap/2003/022403a.pdf

ČČihiháák, 2004, “STk, 2004, “ST: A Review of Ke: A Review of Key Conceptsy Concepts,,” Czech ” Czech National Bank technical note 2/National Bank technical note 2/20200404– http://www.cnb.cz/en/pdf/IRPN_2_2004.pdf