Rules of Thumb for Bank Solvency Stress Testing

Download or read book Rules of Thumb for Bank Solvency Stress Testing written by Mr.Daniel C. Hardy and published by International Monetary Fund. This book was released on 2013-11-11 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: Rules of thumb can be useful in undertaking quick, robust, and readily interpretable bank stress tests. Such rules of thumb are proposed for the behavior of banks’ capital ratios and key drivers thereof—primarily credit losses, income, credit growth, and risk weights—in advanced and emerging economies, under more or less severe stress conditions. The proposed rules imply disproportionate responses to large shocks, and can be used to quantify the cyclical behaviour of capital ratios under various regulatory approaches.