Global Bank Stress Test-2021-11-08-CEF
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<strong>Stress</strong> <strong>Test</strong> Approach & Methodology<br />
Income Statement<br />
and Other Models<br />
Balance Sheet<br />
Projection<br />
Capital shortfalls<br />
• Panel regression models (except for<br />
trading income and other income)<br />
for each country<br />
• Sign restrictions, Bayesian model<br />
averaging<br />
• Combines all Income projections<br />
• Assumptions for taxes, dividends<br />
• Static or dynamic balance sheets<br />
• Risk weights (standardized vs.<br />
IRB approach, Basel formulas)<br />
• Focus on CET1 ratios<br />
• Threshold: 4.5 percent<br />
• PDs and LGDs from NLRs<br />
Left hand side variables<br />
Net Interest Margin<br />
Net Loan Loss Rates<br />
Net Fee and Commission Income<br />
Other Comprehensive Income<br />
Other Income/Expense<br />
Net Trading Income Ratio<br />
Right hand side variables<br />
GDP growth<br />
Unemployment rate<br />
Short term rates<br />
Term spread<br />
Stock price growth<br />
VIX<br />
Corporate spreads<br />
Constant<br />
Stand. deviation approach<br />
8
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