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5 posts on "Stress Testing"
April 20, 2023

CRISK: Measuring the Climate Risk Exposure of the Financial System

Photo: windmill farm with solar panels on the ground around them; story about climate change and bank risk.

A growing number of climate-related policies have been adopted globally in the past thirty years (see chart below). The risk to economic activity from changes in policies in response to climate risks, such as carbon taxes and green subsidies, is often referred to as transition risk. Transition risk can adversely affect the real economy through […]

February 13, 2017

How Resilient Is the U.S. Housing Market Now?

Housing is by far the most important asset for most households, and, not coincidentally, housing debt dwarfs other household liabilities. The relationship between housing debt and housing values figures significantly in financial and macroeconomic stability, as events during the housing bust of 2006-12 clearly demonstrated. This week, Liberty Street Economics presents five posts touching on various aspects of housing, from the changing relationship between mortgage debt and housing equity to the future of homeownership. In today’s post, we provide estimates of housing equity and explore how vulnerable households are to declines in house prices, using methods introduced in our paper “Tracking and Stress Testing U.S. Household Leverage.”

April 6, 2015

Are BHC and Federal Reserve Stress Test Results Converging? What Do We Learn from 2015?

In March, the Federal Reserve and thirty-one large U.S. bank holding companies (BHCs) announced results of the latest Dodd-Frank Act-mandated stress tests. Some commentators have argued that BHCs, in designing their stress test models, have strong incentives to mimic the Fed’s stress test results, since the Fed’s results are an integral part of the Federal Reserve’s supervisory assessment of capital adequacy for these firms. In this post, we look at the 2015 stress test projections by the eighteen largest U.S. BHCs and by the Fed and compare them to similar numbers from 2013 and 2014. As stress testing becomes more established, do we see evidence that the BHCs are mimicking the Fed?

February 2, 2015

Bank Capital and Risk: Cautionary or Precautionary?

Do riskier banks have more capital? Banking companies with more equity capital are better protected against failure, all else equal, because they can absorb more losses before becoming insolvent.

June 4, 2014

The CLASS Model: A Top-Down Assessment of the U.S. Banking System

Central banks and bank supervisors have increasingly relied on capital stress testing as a supervisory and macroprudential tool.

Posted at 7:00 am in Financial Institutions | Permalink
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