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A Liquidity Risk Stress-Testing Framework with Basel Liquidity Standards

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Listed:
  • Hana Hejlová
  • Zlatuše Komárková
  • Marek Rusnák

Abstract

We present a macro stress-testing model for banks' market and funding liquidity risks with a survival period of one year. The model follows the main principles of the Basel standards LCR and NSFR. Besides, the model takes into account the impact of both bank-specific and market-wide scenarios and includes second- round effects of shocks due to banks' feedback reactions. The presented methodology is then applied to a sample of Czech banks. This allows us to monitor the sensitivity of their liquidity position to the combination of shocks under consideration.

Suggested Citation

  • Hana Hejlová & Zlatuše Komárková & Marek Rusnák, 2020. "A Liquidity Risk Stress-Testing Framework with Basel Liquidity Standards," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(3), pages 251-273.
    • Handle: RePEc:prg:jnlpep:v:2020:y:2020:i:3:id:732:p:251-273
    DOI: 10.18267/j.pep.732
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    More about this item

    Keywords

    banking; financial stability; liquidity; stress testing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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