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Sketching a roadmap for systemic liquidity stress tests

Author

Listed:
  • Hałaj, Grzegorz
  • Henry, Jérôme

    (Principal Adviser, European Central Bank, Germany)

Abstract

This paper aims to identify and specify guiding principles for designing and implementing a systemic liquidity stress test (SLST), a necessary complement to more standard, and by now systemic, solvency stress tests. The paper focusses on the types of data and models that would be ideally required. We also illustrate with a concrete example how to operationalise these principles for a system of European banks. The paper will then provide practical guidelines for policymakers and analysts building an SLST set-up or process, with a view to assessing liquidity risks and to understanding shock propagations in a complex financial system. Both elements are specifically relevant to macroprudential authorities.

Suggested Citation

  • Hałaj, Grzegorz & Henry, Jérôme, 2017. "Sketching a roadmap for systemic liquidity stress tests," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 10(4), pages 319-340, October.
    • Handle: RePEc:aza:rmfi00:y:2017:v:10:i:4:p:319-340
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    More about this item

    Keywords

    liquidity; stress-test; macroprudential; systemic risk; network; contagion;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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