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Liquidity Scenario Analysis in the Luxembourg Banking Sector

Author

Listed:
  • ?tefan Rychtárik

Abstract

This paper aims to develop the basis for an approach to measure the liquidity risk sensitivity of banks in Luxembourg and to test it on real banking sector data. For this purpose we have developed four different scenarios: run on a bank, use of committed loans by counterparties, netting of the position with the parent financial group and changes in conditions of refinancing operations with the Eurosystem. The impact of all four simulations is measured by relative changes of liquidity ratios that have been introduced for this purpose. In a second step, this methodology is tested on a sample of 32 banks active in the Luxembourg banking sector aiming at identifying the most severe scenario or a combination of scenarios and the most vulnerable banks of the sample.

Suggested Citation

  • ?tefan Rychtárik, 2009. "Liquidity Scenario Analysis in the Luxembourg Banking Sector," BCL working papers 41, Central Bank of Luxembourg.
    • Handle: RePEc:bcl:bclwop:bclwp041
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    File URL: https://www.bcl.lu/fr/Recherche/publications/cahiers_etudes/41/BCLWP041.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Juraj Zeman & Pavol Jurca, 2008. "Macro Stress Testing of the Slovak Banking Sector," Working and Discussion Papers WP 1/2008, Research Department, National Bank of Slovakia.
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    Cited by:

    1. Franco Stragiotti, 2009. "Stress testing and contingency funding plans: an analysis of current practices in the Luxembourg banking sector," BCL working papers 42, Central Bank of Luxembourg.
    2. Jean Michel Banto & Atokê Fredia Monsia, 2021. "Microfinance institutions, banking, growth and transmission channel: a GMM panel data analysis from developping countries," Post-Print hal-02888281, HAL.

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    More about this item

    Keywords

    Liquidity risk; Scenario analysis; Banking sector; Stress testing;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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