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Financial Stability Paper No 17: RAMSI: a top-down stress-testing model

Author

Listed:
  • Burrows, Oliver

    (Bank of England)

  • Learmonth, David

    (Bank of England)

  • McKeown, Jack

    (Bank of England)

Abstract

Top-down stress testing is one way of assessing the resilience of the financial system to the risks it might face now, or in the future. And by considering a range of different risks, top-down stress testing can also provide an indication of the key vulnerabilities of the system. The Bank of England’s Risk Assessment Model of Systemic Institutions (RAMSI) is an example of a top-down stress-testing model and is one part of the Bank’s risk assessment toolkit. This paper offers an overview of RAMSI and provides, by way of illustration, a detailed description of its implementation as part of the comprehensive set of stress tests carried out during the IMF’s 2011 UK Financial Sector Assessment Program (FSAP).

Suggested Citation

  • Burrows, Oliver & Learmonth, David & McKeown, Jack, 2012. "Financial Stability Paper No 17: RAMSI: a top-down stress-testing model," Bank of England Financial Stability Papers 17, Bank of England.
    • Handle: RePEc:boe:finsta:0017
    Note: http://www.bankofengland.co.uk/financialstability/Pages/fpc/fspapers/fs_paper17.aspx
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    References listed on IDEAS

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    3. Borio, Claudio & Drehmann, Mathias & Tsatsaronis, Kostas, 2014. "Stress-testing macro stress testing: Does it live up to expectations?," Journal of Financial Stability, Elsevier, vol. 12(C), pages 3-15.
    4. Sujit Kapadia & Matthias Drehmann & John Elliott & Gabriel Sterne, 2012. "Liquidity Risk, Cash Flow Constraints, and Systemic Feedbacks," NBER Chapters, in: Quantifying Systemic Risk, pages 29-61, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Henry, Jérôme & Zimmermann, Maik & Leber, Miha & Kolb, Markus & Grodzicki, Maciej & Amzallag, Adrien & Vouldis, Angelos & Hałaj, Grzegorz & Pancaro, Cosimo & Gross, Marco & Baudino, Patrizia & Sydow, , 2013. "A macro stress testing framework for assessing systemic risks in the banking sector," Occasional Paper Series 152, European Central Bank.
    2. Tente, Natalia & von Westernhagen, Natalja & Slopek, Ulf, 2017. "M-PRESS-CreditRisk: A holistic micro- and macroprudential approach to capital requirements," Discussion Papers 15/2017, Deutsche Bundesbank.
    3. Thomas Siemsen & Sigurd Mølster Galaasen & Pablo D'Erasmo & Alfonso Irarrazabal & Dean Corbae, 2016. "Stress Testing in a Structural Model of Bank Behavior," 2016 Meeting Papers 1315, Society for Economic Dynamics.
    4. Markus K. Brunnermeier & Patrick Cheridito, 2019. "Measuring and Allocating Systemic Risk," Risks, MDPI, vol. 7(2), pages 1-19, April.
    5. Ferrari, Stijn & Van Roy, Patrick & Vespro, Cristina, 2021. "Sensitivity of credit risk stress test results: Modelling issues with an application to Belgium," Journal of Financial Stability, Elsevier, vol. 52(C).
    6. International Monetary Fund, 2016. "Argentina: Financial Sector Assessment Program-Financial Sector Stability-Technical Note," IMF Staff Country Reports 2016/065, International Monetary Fund.
    7. David Longworth & Frank Milne, 2021. "Parallels Between Financial Regulation Prior to the Global Financial Crisis and Lack of Public Health Preparation Prior to Covid-19," Working Paper 1455, Economics Department, Queen's University.
    8. Jorge A. Chan-Lau, 2015. "Structural Market-Based Top–Down Stress Tests of the Banking System," Global Credit Review (GCR), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 35-48.
    9. Burrows, Oliver & Learmonth, David & McKeown, jack & Williams, Richard, 2012. "RAMSI: a top-down stress-testing model developed at the Bank of England," Bank of England Quarterly Bulletin, Bank of England, vol. 52(3), pages 204-212.
    10. Tijmen Daniëls & Patty Duijm & Franka Liedorp & Dimitris Mokas, 2017. "A top-down stress testing framework for the Dutch banking sector," DNB Occasional Studies 1503, Netherlands Central Bank, Research Department.
    11. Pliszka, Kamil, 2021. "System-wide and banks' internal stress tests: Regulatory requirements and literature review," Discussion Papers 19/2021, Deutsche Bundesbank.
    12. Pavel Kapinos & Oscar A. Mitnik, 2016. "A Top-down Approach to Stress-testing Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 49(2), pages 229-264, June.
    13. Financial Stability Committee, Task Force on cross-border Spillover Effects of macroprudential measures & Kok, Christoffer & Reinhardt, Dennis, 2020. "Cross-border spillover effects of macroprudential policies: a conceptual framework," Occasional Paper Series 242, European Central Bank.

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    More about this item

    Keywords

    bank regulation; stress test;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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