Enhance the rigor and institutional coverage of stress testing for banks
Stress testing liquidity risks: The Bundesbank has made commendable efforts to
enhance the rigor and institutional coverage of stress testing for banks, but has yet to
incorporate liquidity risks within its framework.
Banking supervisors regularly review
banks’ internal stress test framework/models and obtain internal liquidity stress test
results from selected banks to evaluate their forward-looking liquidity positions.
However, these results are less independent, comparable and consistent than those
derived from the authorities’ own tests.
The authorities are encouraged to incorporate
liquidity scenarios in their stress testing framework and to perform their own liquidity
stress tests. In addition, the authorities could further embed liquidity and other stress
tests in their supervisory practices and make greater use of stress test results.
EU Forecast
euf:ba.18.j:23/nws-01