Stress testing and bank business patterns: A regression discontinuity study

García, Raffi E.; Steele, Suzanne

doi:10.1016/j.jbankfin.2020.105964

Cited by 8 publications

(4 citation statements)

References 35 publications

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“…Banks can survive a financial crisis if they have sufficient capital during a crisis. In America, there are five capital adequacy ratios that must be met by banks to protect themselves from the risk of loss during a crisis, namely: capital ratio, tier 1 ratio, common equity tier 1 (CET1) ratio, leverage ratio, and supplemental leverage ratio (García & Steele, 2020). Schuermann (2014) states that the standard approach of relying on capital ratios is unable to provide good information about how much capital is needed to face a financial crisis so stress testing is an indispensable tool.…”

Section: Introductionmentioning

confidence: 99%

Bank Competition and Stability: Evidence from Rural Banks in Bali

Yudiaatmaja¹,

Wiksuana²,

Wiagustini³

et al. 2022

REASER

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The relationship between competition and stability is widely understood by researchers with two different perspectives, namely competition-fragility and competition-stability. A lot of research have been conducted regarding the relationship between competition and stability in the banking sector but have not specifically examined the stability of classic model of rural banks. The purpose of this study was to empirically examine the effects of rural banks competition and stability based on the aspects of capital, earning asset quality, profitability and liquidity. The indicators used in this study are adjusted to the characteristics of rural banks and existing regulations. The results of the study indicate that the competition variable has a significant positive effect on the stability of rural banks, and supports the view of competition-stability.

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Section: Introductionmentioning

confidence: 99%

Bank Competition and Stability: Evidence from Rural Banks in Bali

Yudiaatmaja¹,

Wiksuana²,

Wiagustini³

et al. 2022

REASER

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“…However, how much capital is needed to survive in the midst of a crisis is a question that is not easy to answer given the uncertainty about how severe the crisis will be. [3] explained that there are five capital adequacy ratios used by banks in America as a reference in order to survive in the midst of a crisis, namely the capital ratio, tier 1 ratio, common equity tier 1 (CET1) ratio, leverage ratio, and supplemental leverage ratio.…”

Section: Introductionmentioning

confidence: 99%

“…Leverage ratio and supplemental ratio are ratios that are not based on risky assets, while capital ratio, tier 1 ratio, common equity tier 1 (CET1) ratio are ratios that pay attention to risk aspects in assets [3]. The ratio by taking into account the risk aspect of assets means that the riskier the bank's assets, the more capital buffer needed to cover losses.…”

Section: Introductionmentioning

confidence: 99%

“…Due to the enormous costs involved in dealing with banking crises, the central bank and financial services authorities seek various ways to predict, anticipate and even if possible avoid a banking crisis.. To anticipate the occurrence of a banking crisis, it is important for financial services authorities and banking institutions to conduct stress tests to determine the bank's resilience to potential disturbance that could threaten the sustainability of the bank's business. The Federal Reserve usually runs stress tests to simulate baseline, adverse and severe adverse scenarios based on assumptions of economic variables, such as GDP, unemployment, interest rates, in a state of distress [3] Predicting when a crisis will occur in the future can be assisted by building an Early Warning System (EWS). [11] stated that Financial Stability Reviews are the initial stage carried out by EWS to help the authorities identify potential risks that may occur in th future.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Rural Banks Stability Index: The Case of Bali

Yudiaatmaja¹,

Bagia²,

Suarmanayasa³

et al. 2021

Advances in Economics, Business and Management Research

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Stress testing for IInd pillar life-cycle pension funds using hidden Markov model

Kabašinskas,

Kopa,

Šutienė

et al. 2024

Ann Oper Res

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This paper presents a stress testing technique based on a hidden Markov regime switching model and scenario generations. Firstly, we assume that investor’s risk preferences and beliefs are primarily observed in main world indices and then transmitted to other markets such as IInd pillar life-cycle pension funds. This enables both regime (market state) identification and regime-switching detection. Second, we apply stress to the transition matrix by increasing probabilities of moving to a worse market state, i.e., we increase the transition probabilities on the upper-right side of the main diagonal and decrease the diagonal probabilities correspondingly. Third, future scenarios (evolution) of returns of pension funds are generated using stressed transition matrices and basic risk and performance measures of the final wealth are presented. Finally, three different strategies for pension managers are considered and compared to each other. The results show how the best strategy depends on the stress level.

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Stress testing and bank business patterns: A regression discontinuity study

Cited by 8 publications

References 35 publications

Bank Competition and Stability: Evidence from Rural Banks in Bali

Bank Competition and Stability: Evidence from Rural Banks in Bali

Rural Banks Stability Index: The Case of Bali

Stress testing for IInd pillar life-cycle pension funds using hidden Markov model

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