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Does Regulatory Stress Testing Make Banks Perform Better and Be Less Risky?

In: Digitalization in Finance and Accounting

Author

Listed:
  • Karel Janda

    (University of Economics, Prague
    Institute of Economic Studies, Charles University)

  • Oleg Kravtsov

    (University of Economics, Prague)

Abstract

In this paper, we examine the impact of regulatory scrutiny of stress testing on the risk-taking and performance of the banks in the European Union (EU). Our findings suggest that the banks with the poorer capitalization or capital gap according to the results of EU-wide stress testing, reduce more intensively the riskiness of their portfolio and non-performing exposure. The banks with larger buffer or surplus in stressed capital do not increase risk in the portfolio or exhibit the excessive loan growth. Our paper contributes to the literature dedicated to the investigation of the implications of regulatory stress tests on the bank´s conduct.

Suggested Citation

  • Karel Janda & Oleg Kravtsov, 2021. "Does Regulatory Stress Testing Make Banks Perform Better and Be Less Risky?," Springer Proceedings in Business and Economics, in: David Procházka (ed.), Digitalization in Finance and Accounting, pages 109-120, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-55277-0_10
    DOI: 10.1007/978-3-030-55277-0_10
    as

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