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Stress Testing the Exposure of Austrian Banks in Central and Eastern Europe

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Abstract

Austrian banks are heavily engaged in Central and Eastern European (CEE) markets primarily by running local subsidiaries but also by extending cross-border loans. We give an account of the historical development and the status quo of these exposures and conduct a stress test for the Austrian banking system with respect to its credit exposure vis-à-vis the CEE region. Our test is based on an analysis of the current state of the local banking systems from a risk perspective, inter alia drawing on stress testing experiences gained by the national central banks and the International Monetary Fund. We use a stress scenario that (i) takes account of the differences in host country risks and (ii) represents a worst case that deliberately exceeds historical shocks. It turns out that, despite the dramatic worsening of the economic environment implied by the scenario, the Austrian banking system is not put at risk by the hypothesized crisis. The possible repercussions of a crisis in a single country via solvency problems of the Austrian parent institution turn out to be well limited.

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  • Michael Boss & Gerald Krenn & Claus Puhr & Markus Schwaiger, 2007. "Stress Testing the Exposure of Austrian Banks in Central and Eastern Europe," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 13, pages 115-134.
    • Handle: RePEc:onb:oenbfs:y:2007:i:13:b:4
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    1. Mr. Paul Louis Ceriel Hilbers & Mr. Matthew T Jones & Mr. Graham L Slack, 2004. "Stress Testing Financial Systems: What to Do When the Governor Calls," IMF Working Papers 2004/127, International Monetary Fund.
    2. Ceyla Pazarbasioglu & Miss Gudrun Johnsen & Mr. Paul Louis Ceriel Hilbers & Ms. Inci Ötker, 2005. "Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies," IMF Working Papers 2005/151, International Monetary Fund.
    3. repec:onb:oenbwp:y::i:96:b:1 is not listed on IDEAS
    4. Maria Soledad Martinez Peria & Mr. Giovanni Majnoni & Mr. Matthew T Jones & Mr. Winfrid Blaschke, 2001. "Stress Testing of Financial Systems: An Overview of Issues, Methodologies, and FSAP Experiences," IMF Working Papers 2001/088, International Monetary Fund.
    5. Petr JAKUBÍK, 2007. "Macroeconomic Environment and Credit Risk (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 60-78, March.
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    1. repec:onb:oenbwp:y:2007:i:14:b:1 is not listed on IDEAS
    2. International Monetary Fund, 2008. "Austria: Financial Sector Assessment Program Technical Note: Stress Testing and Short-Term Vulnerabilities," IMF Staff Country Reports 2008/204, International Monetary Fund.
    3. Petr Jakubík & Jaroslav Heřmánek, 2008. "Stress testing of the czech banking sector," Prague Economic Papers, Prague University of Economics and Business, vol. 2008(3), pages 195-212.
    4. repec:onb:oenbwp:y:2008:i:15:b:1 is not listed on IDEAS
    5. Christoph Aymanns & J. Doyne Farmer & Alissa M. Keinniejenhuis & Thom Wetzer, 2017. "Models of Financial Stability and their Application in Stress Tests," Working Papers on Finance 1805, University of St. Gallen, School of Finance.
    6. repec:wsr:pbrief:y:2010:i:006 is not listed on IDEAS
    7. David Liebeg & Markus Schwaiger, 2007. "Determinants of Bank Interest Margins in Central and Eastern Europe," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 14, pages 68-84.
    8. Vazquez, Francisco & Tabak, Benjamin M. & Souto, Marcos, 2012. "A macro stress test model of credit risk for the Brazilian banking sector," Journal of Financial Stability, Elsevier, vol. 8(2), pages 69-83.

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    More about this item

    Keywords

    financial stability; Central and Eastern Europe; stress t testing; credit risk.;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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