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The Relationship between Liquidity Risk and Credit Risk in The CNB's Liquidity Stress Tests

In: CNB Financial Stability Report 2015/2016

Author

Listed:
  • Zlatuse Komarkova
  • Marek Rusnak
  • Hana Hejlova

Abstract

This article describes an extension to the bank liquidity stress test methodology used by the CNB. The new test has been lengthened to a one-year stress period. Shocks are generated using the CNB's macro-stress scenario and bank solvency macro-stress test results. The test concept is based on the principles of the European LCR and NSFR liquidity standards. By changing its liquidity test methodology the CNB is responding to the need to incorporate the impact of credit risk into the liquidity position of Czech banks and to monitor their liquidity position over a longer stress period. 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

  • Zlatuse Komarkova & Marek Rusnak & Hana Hejlova, 2016. "The Relationship between Liquidity Risk and Credit Risk in The CNB's Liquidity Stress Tests," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2015/2016, chapter 0, pages 127-136, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:fsr1516/2
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    References listed on IDEAS

    as
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