A Guide to IMF Stress Testing
Back Matter

Back Matter

Author(s):
Li Ong
Published Date:
December 2014
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    Index

    • Accounting-based approach

      • comparison of, 3t

      • introduction of, 4

      • operational considerations of, 5, 5f, 6t, 7t

      • utilization of, 4, 5f

      • See also Balance sheet-based approach; Network analysis approach

    • Acharya, Viral V., 410

    • Actuarial liabilities

      • for active members, 186–87, 186nn10–11, 202

      • DB and, 185–89, 186nn7–10, 187n12, 187t, 188t, 189nn13–16

      • individual and aggregate values of, 189, 189n16

      • PBO and, 189

      • projected unit credit cost method and, 187–89, 187n12, 189nn13–16

      • RBO and, 189, 189n14

      • for retired members, 186, 186nn7–9, 187t, 188t, 201

      • See also Defined benefit; Retirement

    • Ad hoc shock method

      • Breaking Point method and, 47–58, 47n5, 48t, 49t, 50t, 51t, 53t, 54t

      • data, 46–47, 46t, 47n3, 47t

      • overview of, 45–46

      • scenarios, 47–55, 49t, 50t, 51t, 53t, 54t

      • summary of findings with, 52–55

    • Adrian, Tobias, 54, 241, 264, 264n3, 268

    • Advanced Internal Ratings Based approach, 60

    • Advisory Committee on Sovereign Wealth Funds, 250

    • Aikman, David, 15, 130, 231

    • Akaike, Hirotugu, 399, 541

    • Akaike information criterion, 399, 541

    • Albania, 155, 1561, 167t–169t

    • Alfonso, Gara, 124

    • Allen, Franklin, 124, 210

    • Allied Irish Banks PLC, 281, 283–84, 283n3

    • Altman, Edward I., 247

    • American International Group, 104, 253, 264, 269, 269t, 523–24, 527

    • Angeloni, Ignazio, 562

    • Anglo Irish Bank Corp. PLC, 281

    • Arellano, Manuel, 158, 158t, 462

    • Arellano-Bover System GMM estimator, 462

    • Asian crisis, 359–60, 562

    • Aspachs, Oriol, 515

    • Assets

      • balance sheet and, 97–98, 97n18, 98t, 361b

      • of CESE, 155, 155n9

      • correlation between liabilities and, 199

      • correlation of, 63, 63n13

      • DB, shocks and, 195–96, 196n20, 196t

      • domestic currency, 364, 364f

      • FX deposits and, 36n28

      • GOB balance sheet and, 108–9, 108nn15–16, 109nn17–18, 109t

      • government, 364, 364f

      • haircuts for, 97–98, 97n18, 98t

      • implied value of, 416n14

      • of Landsbanki Íslands hf., 73–74, 74t

      • management of, 380

      • market prices of, 97–98, 97n18

      • monetary authority, 364, 364f

      • real estate, 129

      • reevaluation of, 106

      • regression of, 537f

      • return, 395–97, 396t, 397n7

      • shock with multi-, 199

      • sovereign, 362–64, 362n5, 362nn8–9, 363f, 383

      • total, 36

      • See also Capital asset pricing model; Return on assets; Risk-weighted assets

    • Asset-weighted DD, 563

    • Assumptions

      • of BHC, 535–38, 535nn8–9, 536f, 537f, 537t

      • decrement, 184, 201

      • depreciation, 32

      • discount rate, 185, 185nn4–6, 201

      • FME, 73

      • GDP macroeconomic, 556t

      • inflation, 185, 185n3, 186, 186n8

      • retirement benefit, 201

      • salary, 185, 185n3, 201

      • in Stress Tester 3.0, 24n7

      • in stress tests, 18, 41

    • Atunbas, Yener, 562

    • Austria, 60, 136n1, 155

    • Austrian Central Bank, 60

    • Austrian Financial Market Authority, 136n1

    • Austrian National Bank. See Oesterreichische Nationalbank

    • Available stable funding (ASF)

      • components of, 433, 433n4

      • covariance of, 435f

      • factors, 442t

      • volatility of, 441b

    • Avesani, Renzo G., 42, 456

    • Babouček, Ivan, 28b

    • Babus, Ana, 210

    • Bae, Kee-Hong, 291, 301

    • Bagehot, Walter, 561

    • Balance sheet, 104

      • asset side of, 97–98, 97n18, 98t, 361b

      • BHC and expansion of, 543–46, 547f, 548f

      • data on, 25–26, 25b

      • GOB, 108–9, 108nn15–16, 109nn17–18, 109t

      • household, 343–46, 343f, 343nn4–5, 344nn7–8, 344t, 345f–346f 345n9, 347t

      • liability side of, 361b

      • risk-adjusted, 415, 415t

      • shock, 48

      • short-term shock and, 48

      • soundness of, 52

      • traditional, 415, 415t

      • See also Off-balance sheet; Sovereign balance sheet

    • Balance sheet-based approach

      • advantages and dimensions of, 13, 13n1

      • crisis and regulatory reforms with, 14

      • data considerations in, 13–14, 14n3

      • developments to, 15

      • FSAP and, 13

      • portfolio credit risk of, 14–15

      • See also Accounting-based approach; Bankistan; Stress Tester 3.0

    • Balance sheet-based network analysis, 243

      • accounting identity and, 231, 231f, 231nn4–5, 232f, 233f

      • credit shock and, 232, 232f

      • funding shock and, 232, 232f, 233f

      • in practice, 231f, 233–39, 235t, 236t, 237t, 238t, 239t, 240t, 241t, 329n11

      • TCTF and, 230–33, 231f, 231n2, 231nn4–5, 232f 233f

    • Baltic states, 156t, 158n12

    • Banco Bilbao Vizcaya Argentaria, 250, 256, 274, 528

    • Banco Central de Chile

      • data, 390–91, 392f

      • inclusion of, 237

    • Banco Central do Brasil, 108

    • Banco de Chile, 256

    • Banco de Crédito e Inversiones, 256

    • Banco Santander, 250, 274

    • Bank for International Settlements (BIS)

      • data, 161n20, 167t–169t, 207, 210, 210n3, 213–14, 214n11, 284

      • on foreign claims, 155

      • jurisdictions, 230

      • statistics, 234, 234n11

    • Bank holding company (BHC), 60n1, 130, 130n14

      • alternative scenario of, 548–51, 552t, 553t

      • analysis of, 531–34, 532nn2–7, 533t–534t, 534f

      • assumptions and methodology of, 535–38, 535nn8–9, 536f, 537f, 537t

      • balance sheet expansion and, 543–46, 547f, 548f

      • baseline scenario of, 534–48, 535nn8–9, 536f 537f, 537t, 538n10, 538t, 539t, 540f, 540n11, 541f, 541n16, 542f, 543n18, 544f, 545f, 546f, 547f, 548f, 548n19, 549t, 550f

      • capital adequacy of, 532, 532n7, 534f

      • capital shortfall and, 546–48, 548n19, 549t, 550f

      • CAR of, 532, 532n7, 534f

      • charge-off rate(s) of, 557, 558

      • CN of, 552t, 553t

      • CONS charge-off rate of, 558

      • CRE charge-off rate of, 557

      • earnings profiles and, 537f, 538–41, 539t, 540f, 540n10, 541f,

      • JP Morgan as, 523, 528

      • loan loss projections for, 557–59, 558f, 559n23, 559t

      • macroprudential stress test for, 523nn2–7, 532

      • retained earnings and, 541–43, 54ln16, 543n18, 544f, 545f, 546f,

      • RRE charge-off rate of, 558

      • securities write-downs and, 538, 538n10, 539t

    • Banking

      • CCA and other risk measures of, 388–95, 389f, 390n3, 391f, 392f, 393f, 394f, 395f,

      • linkage, 521n18

      • risk indicators, 390–95, 391f, 393f, 394f, 395f, 570n11

      • U.K.’s corporate and financial linkages within, 349–56, 350f, 350n10, 351f, 352f, 353f, 354f, 355b, 356f

      • U.K.’s household and financial linkages within, 328–49, 338f, 339f, 340f, 341f, 342f, 342n3, 343f, 343nn4–5, 344nn7–8, 344t, 345f–346f, 347n9, 347t, 348f, 349f, 350f

    • Banking groups, 283

      • CEE, 156t, 158n12, 171

      • largest, 313t, 316t, 317t, 320t–321t

      • See also Cross-border banking groups; EU banking groups

    • Banking sector

      • EL from U.K., 422–27, 423nn29–32, 424f, 425f, 426f, 427t

      • U.S., 440–45, 441b, 441n23–24, 442f, 442n58, 442t, 443f, 444n55, 444t

      • See also Brazilian banking sector

    • Banking stability index (BSI)

      • BSM and, 521, 521n18

      • JPoD and, 522f, 523f 525–26

    • Banking stability measure (BSM)

      • BSI and, 521, 521n18

      • changes in, 515

      • characterization of, 520–21, 521t

      • DD and, 515–16, 516f

      • estimations of, 515

      • JPoD and, 520

      • method summary on, 513

      • model, 384n41, 416n12

      • results of, 521–28, 522f, 523f, 523n20, 524f, 525f, 526f 527f

    • Banking Supervisory Agency. See Superintendencia de Bancos e Instituciones Financieras

    • Banking systems

      • capital losses of, 234, 236t, 241t

      • distress in, 521

      • in Germany, 20, 234, 241, 253

      • JPoD and stability of, 515–16, 516f

      • liquidity stress tests for U.S., 128, 128n5, 132

      • riskiest, 234, 235t

      • shock to, 47, 52, 53t

      • spillover risk of global, 305–8, 306t–307t, 308n22,308t

      • TCTF, 234, 237t

      • in U.K., 234, 240

      • in U.S., 234, 240, 254f, 263

      • vulnerable, 234, 235t

      • See also Chilean banking system

    • Banking System’s Multivariate Density (BSMD), 514

      • characterization of, 515–17

      • CIMDO and, 517–20, 517n10, 518nn11–12, 519b, 519n14

      • empirical results of, 521–28, 522f, 523f, 524f, 525f, 526t, 527f

      • measures, 520–21, 521n18, 521t

    • Bankistan (fictional country)

      • exercise, 18, 19b

      • input data analysis of, 24–28, 24n9, 25b, 26n10, 27f

      • overview and process of, 18–24, 19b, 19f, 20t, 21n2, 23nn5–6, 24nn7–8

      • See also National Bank of Bankistan

    • Bank of America, 523

    • Bank of England, 23, 60, 93

      • analysis, 350n10

      • Credit Conditions Survey, 342

      • index, 130n13

      • liquidity stress tests of, 125t

    • Bank of Ireland, 281, 283–84, 283n3

    • Bank of Nova Scotia, 256

    • Bankruptcy, 28b

      • Brazil and, 110n22

      • codes, 177

      • corporate, 247, 265

      • incidents of, 362n4

    • Banks

      • average aggregate or signage aggregate, 111n30

      • capital of, 231, 231nn4–5

      • CAR of foreign-owned and domestic, 165t

      • contagion risk among largest, 320t–321t

      • contagion risk of Irish, 281–84, 282b, 282nn1–2

      • DD of, 286b, 287t, 316t

      • distress and fragility of, 28b

      • distress between, 521, 521t

      • EU, 286b, 324t, 328t–329t

      • fire sales and rollover of, 97–98, 97n18, 98t

      • foreign, 25

      • French, 274, 286b

      • German, 286b, 455n5

      • GOB default of, 112–15, 112n33, 113t, 114t, 115n34, 115t, 116t

      • Italian, 286b

      • Latin American, 4, 521, 528

      • macroeconomic factors and, 334

      • model of, 566

      • multiple aggregate, 117–20, 117n36, 118t, 119t, 120t

      • of Netherlands, 125t, 286b, 500n28

      • no GOB default of, 112, 112nn32–33, 113t

      • ownership stake of, 161

      • panics associated with, 124

      • parent, 154–55, 154t, 155t, 156t, 160, 160n14, 161, 167t–169t

      • PoD of, 515, 522

      • portfolio of, 8, 104–6, 105nn4–7

      • profits and, 22–23

      • rating downgrades of, 97

      • ratings and risk of Brazil’s, 103, 115–21, 117nn35–36, 118t, 119t, 120t

      • ratings and risk of GOB, 103, 115–21, 117nn35–36, 118t, 119t, 120t

      • regulators of, 152n4

      • risk simulation model of, 106–8, 106nn10–11, 107t, 108nn12–16, 109nn17–18, 109t

      • safety of, 36

      • shock to, 47, 52, 53t, 55

      • short-term counterbalancing approach or run on, 95, 97

      • simulation results of GOB, 112–20, 112nn31–33, 113t, 114t, 115n34, 115t, 116t, 117t, 118t, 119t, 120t

      • single aggregate, 117, 117n35

      • soundness of, 55

      • sovereign risk and, 334

      • Spanish, 230, 274, 284, 286

      • systemic risk within, 111–12, 111n30, 116–21, 117nn35–36, 118t, 119t, 120t

      • U.K., 286b

      • U.S., 230, 286b

      • write-downs of, 263–64

    • Bankscope, 93n13, 109

    • Bank-to-bank

      • changes in NPLs, 28b, 29, 29n12

      • data, 28b

      • exposures, 26

      • interest rate spread, 108n12

    • Barclays, 181t, 423n30, 527

    • Barnhill, Theodore, 15, 94, 104, 108, 110, 112n31, 128

    • Basel Committee on Banking Supervision (BCBS), 14n3

      • on liquidity risk, 71n2, 86–87

      • principles and proposals of, 94, 272

      • standardized approach of, 97, 97n18

    • Basel II, 14

      • framework, 64n19

      • IRB approach, 160n18, 177

    • Basel III, 14, 432

      • framework of, 93

      • impact of, 64, 64n20

      • proposals, 129n11

      • ratios, 97–98, 97t

      • on regulatory capital, 264

      • standards, 423n32

    • Bassett, Gilbert, Jr., 268

    • Bayesian information, 541

    • Bear Stearns

      • failure of, 104, 130n13, 240

      • rescue of, 441

    • Bech, Morten, 243

    • Belarus, 155, 156t, 158n12, 159t, 167t–169t

    • Belgium, 155, 234

    • Belmont, David, 404

    • Bernoulli

      • distributions, 137, 145, 145t

      • events and probabilities, 144, 145t

    • Binomial logit model, 303–4, 303f, 303nn8–9, 304nn10–11

    • Black, Fischer, 4, 247, 271, 286b, 302, 333, 388, 563b

    • Black-Scholes-Merton model (BSoM), 366n19

      • CCA and, 383–85, 383n38, 384nn40–42, 385n43, 389–90, 404, 413, 413n8, 414, 433

      • DD and, 286, 286b

      • traditional, 435

    • Blaschke, Winfrid, 18

    • Bloomberg, 534, 564

    • BNP, 528

    • Board of Governors of the Federal Reserve System, 93, 93n7, 128, 160, 177, 411n5, 558–59, 559f

    • Bohn, Jeffrey R., 271

    • Bond, Stephen, 158, 158t

    • Borio, Claudio, 239, 240, 264, 264n3, 267–68

    • Bosnia, 155, 156t, 159, 167t–169t

    • Boss, Michael, 32

    • Bottom-up (BU)

      • approach to macroeconomic model, 19f, 21–22

      • liquidity stress tests, 94, 95t

    • Brazil

      • aggregation bias portfolio of, 464–66, 465n15, 468f; 469f, 469t, 470t

      • bank ratings and risk of, 103, 115–21, 117nn35–36, 118t, 119t, 120t

      • bankruptcy and, 110n22

      • credit operations in, 457n10

      • credit risk of, 453–54, 454n1

      • elections in, 393, 394–95

      • equity market index of, 105, 105n5

      • GDP of, 454, 463

      • See also Government of Brazil

    • Brazilian banking sector, 230, 471

      • characterization of, 453–54, 454nn1–3

      • credit VaR and, 466–70, 470t, 471t

      • LGD of, 468

      • loan portfolio of, 460t

      • macro model of, 456–57, 456f, 456nn7–8, 457nn9–11, 457t, 458t, 459f

      • methodology, 455–63, 456f, 456nn7–8, 457nn9–11, 457t, 458n12, 458t, 459f, 460t, 461nn13–14, 462f, 463t, 464t–465t

      • method summary on, 453

      • microeconomic model of, 457–63, 457nn10–11, 458n12, 460t, 461nn13–14, 462f, 463t, 464t–465t

      • NPLs and, 454, 454n1, 458–63, 461nn13–14, 461t, 462f, 463–64, 467f

      • portfolio aggregation bias of, 464–66, 465n15, 468f, 469f 469t, 470t

      • review of, 454–55, 455nn5–6

      • stress tests and, 463–70, 465n15, 467f, 468f, 469f 469t, 470t, 471t

    • Brazilian real, 398f, 399, 456

    • Breaking Point method

      • ad hoc shock method and, 47–58, 47n5, 48t, 49t, 50t, 51t, 53t, 54t

      • compromise, 55, 56t, 57t

      • data, 46–47, 46t, 47n3, 47t

      • method, 45

      • overview of, 45–46

      • scenarios, 47–55, 49t, 50t, 51t, 53t, 54t, 56t, 57t

      • summary of findings with, 52–55

    • Breeden, Douglas T., 416, 434

    • Breusch, Trevor S., 541

    • Breusch-Godfrey serial correlation Lagrange multiplier test, 541

    • Breusch-Pagan Lagrange multiplier test, 541

    • Brownlees, Christian T., 410

    • Brunnermeier, Markus K., 239–41, 254, 264, 264n3, 268

    • Buiter, Willem, 74–76

    • Bulgaria, 155, 156t, 159, 167t–169t

    • Call options, 247

    • Call Report Data, 128, 128n5

    • Canada, 250

    • Capital

      • accounting information on, 45

      • adequacy of BHC, 532, 532n7, 534f

      • of banks, 231, 231nn4–5

      • controls in Russia, 365

      • CoVaR measures, 264n2

      • excess, 160t, 161

      • impairment, 217t

      • losses of banking systems, 234, 236t, 241t

      • management, 152

      • as measure of impact, 22

      • ratios, 110–11, 111n24

      • requirements, 163

      • total, 24n8

      • See also Economic capital; Regulatory capital

    • Capital adequacy ratio (CAR), 20, 22, 23–24, 24nn7–8

      • assessment of, 404, 404n10

      • of BHC, 532, 532n7, 534f

      • calculations of, 47

      • CEE and CESE regulatory minimum of, 160, 160n17, 179t

      • by country and bank type, 165t

      • of foreign-owned and domestic banks, 165t

      • of Landsbanki Íslands hf., 73

      • of NPLs, 480–81, 481t postshock, 153n8

      • requirements, 46t, 47

      • sample subsidiaries, 165t

      • stress tests on, 37, 37f

      • terms of, 34

    • Capital asset pricing model, 103, 271

    • Capital charge

      • calculations, 268–72, 268n7, 269f, 269nn8–9, 270f, 271nn12–15

      • interconnectedness and, 263–64, 267

      • risk, 267–68, 268n6

      • TCTF and, 263, 264n3, 265–68, 266f, 268n6

    • Capital injection, 20, 22

    • Capitalization

      • CESE levels of, 152

      • of firms, 416n16

      • measurement of, 22, 61

      • ratios, 91

      • underestimation of, 52

    • Capital need (CN)

      • of BHC, 552t, 553t

      • of CESE, 154, 154n8, 155f, 181t

      • ring-fencing scenarios and, 160–63, 160n15, 160nn17–19, 161n20, 162f, 163f

    • Capital shortfall

      • BHC and, 546–48, 548n19, 549t, 550f

      • EL and, 422, 422n28

      • macroprudential stress test and, 546–48, 548n19, 549t, 550f

    • Carr, Peter, 422

    • Cash

      • flow analysis, 199

      • flow-based liquidity tests, 92

      • flow-type methods, 92

    • CBOE VIX, 566n2

    • Central, Eastern, and Southern Europe (CESE)

      • assets of, 155, 155n9

      • branches and, 153, 153n7

      • capitalization levels of, 152

      • CAR regulatory minimum for, 160, 160n17, 179t

      • credit shock, 151, 156–60, 158n12, 158t, 159t, 160n14

      • description of, 154–56, 154f 154n8, 155f, 156t, 157f

      • implications of, 151–54, 152n4, 152nn1–2, 153 nn5–7

      • LGD and, 160, 177, 177t, 181t

      • NPLs and, 156–60, 158n12, 158t, 159t, 160n14

      • regional shock of, 156–60

      • ROAs and, 156–60, 158n12, 158t, 159t, 160n14

    • Central and Eastern Europe (CEE)

      • banking groups, 156t, 158n12, 171

      • regulatory minimum CAR for, 160, 160n17, 179t

    • Central bank

      • funding by, 93, 238

      • support, 92n5

    • Central Bank of Brazil, 454n2

    • Central Bank of Chile. See Banco Central de Chile

    • Central Limit Theorem, 488n12

    • Cerruti, Eugenio, 153n7

    • Chan-Lau, Jorge, 207, 231, 239–41, 248, 254, 268, 301

    • Chapman, James, 243

    • Chicago Board Options Exchange Market Volatility Index (VIX), 255

      • CCA and, 395, 396t, 397–400, 397t, 402, 405n12, 456n8

      • spreads, 456n8

    • Chile

      • economy of, 249

      • GDP of, 250, 250t

      • during global financial crisis, 249–55, 251f, 252n2, 252n4, 252t, 253t, 254f, 255n11, 402–2, 403f

      • Spain and, 250

    • Chilean banking system

      • CCA of, 387–88

      • EDF, 252–54, 252nn6–7, 253n8, 253t, 254t

      • exposures of, 230, 233, 249–55, 251f, 252n2, 252n4, 252t, 253t, 254f 255n11

      • foreign bank exposure of, 250, 250t, 251t

      • funding risks of, 234

      • IBB and, 250, 250t

      • results of, 255–60, 256n2, 257t, 258t, 259t, 260n

      • TCTF analysis of, 237–39, 238t, 239t, 240f, 241t

      • U.K. and, 250

      • See also Contingent claims analysis; CoRisk

    • Čihák, Martin, 18, 34n26, 45, 60n1, 93–94, 99, 481, 562

    • Citibank, 256, 523

    • Citigroup, 104, 272n16, 273–74, 528

    • Comisión Nacional Bancaria y de Valores (Mexico), 487n6

    • Commercial and industrial loans, 555

      • charge-off rate of, 558

      • losses, 535, 537t

    • Commercial real estate (CRE), 338, 352–54

      • charge-off rate, 557

      • debt, 555

      • losses, 535–36, 537t, 551, 552t

      • prices, 556

    • Committee of European Banking Supervisors, 93

    • Committee on Payment and Settlement Systems-International Organization of Securities Commissions, 8

    • Committee on the Global Financial System, 410n1

    • Commonwealth of Independent States, 155, 156t, 158n12, 159t

    • Conditional probability of default (CoPoD)

      • characterization of, 485–87, 500t, 506–7

      • efficiency, 492b–493b

      • explanatory variables of, 490–93, 493n23, 494t

      • formulation of, 491b–492b

      • intuition, 489

      • methodology of, 489–94, 490nn16–18, 491b–492b, 492b–493b, 494t

      • method summary on, 485

      • PMD and, 502–4, 503f, 504t

      • rationale of, 491b–492b

      • stress test procedure for, 496–97

      • See also Denmark

    • Conditional tail expectation, 413

    • Conditional Value at Risk (CoVaR)

      • based capital measures, 264n2

      • model, 412t

    • Congressional Oversight Panel, 536

    • Consistent Information Multivariate Density Optimizing (CIMDO)

      • BSMD and, 517–20, 517n10, 518nn11–12, 519b, 519n14

      • characterization of, 485–87, 486nn3–5, 500t, 506–7

      • copula, 514n4, 517n10, 518–20, 518nn11–12, 519b, 519n14

      • density specification, 489, 494, 495b, intuition, 494, 495b–496b

      • methodology of, 493–94, 495b–496b

      • method summary on, 485

      • PMD and, 502–4, 503f, 504t

      • stress test procedure for, 496–97

      • See also Denmark

    • Consolidated Financial Statements (Landsbanki Íslands hf.), 73

    • Constant dollar method, 189n15

    • Consumer price index, 395

    • Contagion risk, 33, 33n24

      • determinants and Ireland, 287t, 291–98, 292n9, 292t, 293n10, 293t, 294f, 295t, 296f, 296t

      • among EU banking groups, 326t–327t

      • among EU banks, 328t–329t

      • in Ireland, 281–84, 282b, 282nn1–2

      • of Irish banks, 281–84, 282b, 282nn1–2

      • among largest banks, 320t–321t

      • “macro” interbank, 35, 35f, 35n27

      • method summary on, 281

      • of Netherlands, 283

      • “pure” interbank, 34–35, 34nn25–26

      • sources of, 282b

      • of U.K., 283–84

      • of U.S., 283–84

    • Contingent claims analysis (CCA), 4, 381

      • application of, 360, 361n4

      • BSoM and, 383–85, 383n38, 384nn40–42, 385n43, 389–90, 404, 413, 413n8, 414, 433

      • of Chilean banking system, 387–88

      • of corporate and financial institutions, 333–34, 350f, 353–56, 355b, 356f, 357f

      • of DtD, 389f, 392–93, 393f

      • extensions of, 334–35

      • implicit options of, 384–85, 385t

      • introduction to, 333–35, 333n1

      • method summary on, 387

      • research on, 404–5, 404n10, 405n12

      • risk measures of, 388–95, 389f, 390n3, 391f, 392f, 393f, 394f, 395f

      • RNDP and, 393, 393f, 394f, 395

      • scenario testing of, 402–4, 402f, 403f

      • of sovereign balance sheet, 364–66, 364f, 364nn10–11, 365n12, 365nn16–18

      • sovereign risk with, 359–61, 360n1

      • tools, 387–88

      • U.K. and, 333–34, 337–38, 350f, 353–56, 355b, 356f, 357f

      • VAR and, 388, 399–400

      • VIX and, 395, 396t, 397–400, 397t, 402, 405n12, 456n8

      • See also Sovereign risk; Systemic CCA

    • Copula Choice Problem, 518

    • CoRisk

      • analysis, 249, 264

      • EDF, 255

      • estimation, 254–53, 255n11

      • between financial institutions, 257t, 258t, 259t

      • measures, 252, 252n2

      • method summary on, 249

      • model, 279, 412t

      • network analysis, 270–72, 270f, 271nn12–15

      • quantile regression and, 254–53, 255n11, 268n7

      • spreads, 269, 269f

      • See also Chile; Chilean banking system

    • Corporate bankruptcy, 247, 265

    • Corporate debt, 384n40

    • Corporate default, 361b

    • Corporate leverage, 32, 32n23

    • Corporate loan portfolio, 128, 128n9

    • Cossin, Didier, 407

    • Cost method

      • benefit allocation and, 188–89, 189n13

      • cost allocation and, 188

      • projected unit credit, 187–89, 187n12, 189nn13–16

    • Coval, Joshua, 130

    • Cox, John C., 407

    • Credit

      • availability, 342n3

      • categories, 455

      • cost method projected unit and, 187–89, 187n12, 189nn13–16

      • domestic, 567n4

      • GDP and, 564–66, 567, 568t–569t

      • growth, 550f, 562, 572, 577

      • operations in Brazil, 457n10

      • private sector, 567n4

      • rating, 110, 110n21, 256

      • shock, 28b, 29, 29n12

      • VaR, 135, 146–47, 146f, 147f,

      • VaR models, 42, 377n32

    • Credit Agricole, 274

    • Credit default swap (CDS), 252, 279, 564

      • divergent, 421n24

      • lower, 367–70, 368f–369f, 369n24, 370t, 371f

      • market prices for, 268

      • MIDP and, 372, 372n27

      • RNDP and, 422, 422n27

      • spreads, 252n7

      • See also Fair value CDS; PoDs derived from CDS spreads

    • Credit Metrics, 488n9

    • Credit over GDP, 500

    • Credit-plus-funding shock

      • impact of, 212, 212f, 212n6, 227t–228t

      • transmission of, 211–12, 211n5, 212f, 212n6, 216–18, 220t, 221t

    • Credit risk, 450

      • of Brazil, 453–54, 454n1

      • econometric model, 475–78, 476nn2–4, 477n5, 477n7, 477nn9–10, 478nn11–12

      • GOB model of, 106–12, 106nn10–11, 107t, 108nn12–16, 109nn17–18, 109t, 110nn20–23, 110t, 111nn24–30

      • macroeconomic model of, 28b

      • method summary on, 103–4

      • model of loans, 128–29, 128n9

      • private sector, 103–4

      • RWA for, 63

      • solvency stress tests and, 62

    • Credit risk indicators

      • DtD and, 360, 375, 375n30

      • inclusion of, 404–5

    • Credit-risk-macro nexus, 42

    • CreditRisk+ model, 15, 28–30, 28b, 28n11, 29n12

      • alternative recursive scheme of, 142–43

      • basic, 136–37, 136n4

      • default events and, 136

      • development of, 135–36

      • exposure bands and, 137

      • extensions of, 135, 140–41

      • factors of, 139–40

      • implementation and review of, 135–36, 142–43, 142n8

      • with known probability, 138

      • loan, 128–29, 128n9

      • losses and, 136

      • method summary on, 135

      • with nonrandom default probability, 137

      • normalized exposures and, 136, 136n4

      • Poisson approximation and, 137–38

      • with random default probability, 138–39, 139n6, 146–47, 146f, 147f

      • summary, 141–42

      • toolbox, 143–47, 144t, 145f, 145t, 146f, 147f

    • Credit risk transfer, 283

    • Credit shock

      • balance sheet-based network analysis and, 232,232f

      • CESE, 151, 156–60, 158n12, 158t, 159t, 160n14

      • concentration risk and, 30

      • impact of, 41, 227t–228t

      • increase in NPLs and, 28b, 29, 29n12

      • sectoral shocks and, 29–30

      • simulations of, 211–12, 211f, 211n4, 212f, 212n6

      • transmission of, 210f, 215t, 216f, 215–19, 217t, 217n7, 218f, 219f

      • underprovisioning adjustment and, 28–29, 28n11

    • Credit spreads

      • CDS and risk-neutral, 370, 370n25, 372t

      • EMBI+ and risk-neutral, 370–74, 372nn26–28, 372t, 373t, 374f

    • Credit Suisse, 525

    • Credit Suisse Financial Products (CSFP), 15, 136

      • implementation of, 145

      • loss distribution for, 145, 145t

    • Croatia, 152n4, 155, 167t–169t

    • Croatian National Bank, 152n4

    • Cross-border banking groups, 527–28

      • description of, 154–56, 154f, 154n8, 155f 156t, 157f

      • EU loans and, 153, 153nn6–7

      • internalization of, 300n1

      • loans of, 155n10

      • and subsidiaries, 167t–169t

    • Cross-border financial surveillance, 527–28

      • interbank exposure model and, 211–15, 211f, 211nn4–5, 212f, 212n6, 214f, 214n11

      • method summary on, 205

      • perimeter of prudential regulation and, 223

      • requirements of, 209–11, 210f, 210nn1–3

      • simulation results of, 215–23, 215t, 215n12, 216f, 217t, 218f, 219f, 220t, 221t, 222f, 223f, 224f

    • Crouhy, Michel, 406

    • Czech Republic, 155, 156t, 167t–169t

    • Danish kroner, 500

    • Danmarks Nationalbank, 500

    • Data

      • ad hoc shock method, 46–47, 46t, 47n3, 47t

      • balance sheet, 25–26, 25b

      • bank-to-bank, 28b

      • BCCH, 390–91, 392f

      • BIS, 161n20, 167t–169t, 207, 210, 210n3, 213–14, 214n11, 284

      • Breaking Point method, 46–47, 46t, 47n3, 47t

      • considerations in balance sheet-based approach, 13–14, 14n3

      • DD, 286b

      • on Denmark, 500, 500nn26–29, 500t

      • EDF, 252–54, 252nn6–7, 253n8, 253t, 254t

      • EVT, 303n13, 304–5, 304n14, 304n17

      • financial sector risk, 562–64, 563b, 563f, 576t

      • on France, 155, 576t

      • GFSR, 157, 557

      • IBB, 213–14, 213n10, 214f, 227, 227t–228t

      • income statement, 25–26, 25b

      • input analysis of Bankistan, 24–28, 24n9, 25b, 26n10, 27f

      • intensive, 40–41

      • on Italy, 155, 576t liquidity stress tests, 126–28, 127f

      • macroeconomic, 513–14

      • market, 570n11

      • MKMV, 247–48, 252, 252t, 264, 268

      • NPLs, 475

      • risk transfer, 213–14, 214f

      • stress tests and actual, 18

      • summary, 576t

      • time to repricing, 26

      • URB, 213–14, 213n10, 214f, 227, 227t–228t

    • Datastream, 564

    • Datastream banking sector index, 563

    • Debt

      • corporate, 384n40

      • CRE, 555

      • foreign currency, 362n8, 365

      • of GOB, 105, 105nn6–7

      • management, 378, 379f

      • maturity of, 93

      • sustainability of, 380–81, 380n37

      • U.K.’s unsecured, 349, 350f

      • U.S., 555n20

    • Debt at risk

      • method summary on, 337

      • U.K. and,337–38,344

      • U.K.’s unsecured, 349, 350f

      • See also Contingent claims analysis

    • Debt service-to-income, 344, 344nn7–8, 345f–346f

    • Default

      • banks with GOB, 112–15, 112n33, 113t, 114t, 115n34, 115t, 116t

      • banks with no GOB, 112, 112nn32–33, 113t

      • corporate, 361b

      • events and CreditRisk+ model, 136

      • of GOB, 105, 105nn6–7

      • incidents of, 362n4

      • interbank risk and GOB model of, 103, 106–12, 106nn10–11, 107t, 108nn12–16, 109nn17–18, 109t, 110nn20–23, 110t, 111nn24–30

      • JPoD and, 414

      • private sector, 103–4

      • region of, 489

      • sovereign, 103–6, 361b

      • See also Conditional probability of default; Loss given default; Probability of default; Risk-neutral default probability

    • Default-free value, 365

    • Default risk

      • EL from, 416–18, 416nn12–16, 417nn17–20, 418n21

      • to macroeconomic variables, 395–404, 395f, 395nn5–6, 396t, 397n7, 397t, 398f, 401f, 402f, 403f

    • Deferred tax assets, 542–43, 544f

    • Defined benefit (DB)

      • actuarial cost factors and functions of, 184–85, 184n2, 185nn3–6

      • actuarial liabilities and, 185–89, 186nn7–10, 187n12, 187t, 188t, 189nn13–16

      • asset shock and, 195–96, 196n20, 196t

      • decrement assumptions and, 184, 201

      • discount rate assumptions and, 185, 185nn4–6, 201

      • funding ratio of, 183

      • liability shock and, 196, 196n21

      • mechanics of, 183–84

      • method summary on, 183

      • model pension plan and, 190, 191t–192t, 193f–194f, 195t

      • real pension plan and, 190, 191t–192t, 193f–194f, 195t

      • refinements to, 199

      • retirement benefit assumptions and, 201

      • salary assumptions and, 185, 185n3, 201

      • simplifications of, 192–95, 195nn18–19

      • stress tests for, 190–99, 191t–192t, 193f–194f, 195nn18–19, 195t, 196nn20–21, 196t, 197n30, 197t, 198f, 198t

      • survival probability of, 184–85, 184n2

      • See also Actuarial liabilities; Retirement

    • De Hass, Ralph, 152

    • Dell’Ariccia, Giovanni, 153n7

    • De Nederlandsche Bank, 125t, 500n28

    • De Nicoló, Gianni, 282, 286b

    • Denmark

      • analysis of, 499t, 504–7, 504t, 505t, 506t

      • data on, 500, 500nn26–29, 500t

      • economy of, 497, 498f, 499f

      • EL of, 503, 504t, 505t

      • empirical implementation in, 494t, 497–504, 498f, 499f, 499t, 500nn26–29, 500t, 501f, 501t, 502t, 503f, 503t, 504t

      • implementation data of, 500, 500nn26–29, 500t

      • macroeconomic scenarios in, 494t, 497–500, 498f, 499f, 499t

      • PD in, 494t, 500–502, 501f, 501t, 502f, 503t

      • PMD of, 502–3, 503f, 504t

      • result analysis in, 499t, 504–6, 504t, 505t, 506t

    • Deposits, 72n6

      • FX, 36n28

      • insurance, 230, 264

      • run on, 87

    • Depreciation

      • assumptions, 32

      • direct, 32

      • FX and rate of, 32

    • Deutsche Bank, 14n3, 181t, 528

    • Deutscher Aktien IndeX (DAX), 564, 566n2

    • Development Bank of Singapore, 528

    • de Vries, Caspar G., 301

    • Diamond, Douglas, 124

    • Diebold-Yilmaz spillover, 279

    • Distance to default (DD), 23, 23n6, 248, 577

      • of banks, 286b, 287t, 316t

      • BSM and, 515–16, 516f

      • BSoM model and, 286, 286b

      • data issues of, 286b

      • decreases in, 567n6

      • financial sector risk and, 563, 563b

      • indicators, 286–91, 286b, 287f, 288f, 288t, 289f, 290f, 290t, 301n5

      • as measurement, 282, 282b

      • model, 302–3, 302n6

      • usage of, 252, 252n4

    • Distance to distress (DtD)

      • CCA of, 389f, 392–93, 393f

      • CRIs and, 360, 375, 375n30

      • inversion of, 367n22

      • sovereign credit risk and, 366–70, 368f–369f, 369n24, 370t

    • Distress

      • bank fragility and, 28b

      • in banking system, 521

      • between banks, 521, 521t

      • dependence matrix, 523–24, 526–27, 526t

      • and fragility of banks, 28b

      • of NBFIs, 514

      • See also Joint probability of distress; Probability of distress

    • Distress barrier, 363f, 365t

      • constitution of, 362

      • fixed, 364n10

    • Distress Dependence Matrix, 521, 521t

    • Djankov, Simeon, 63, 177

    • Doing Business, 63

    • Domestic currency, 364n10

      • foreign currency and, 364, 364f

      • of Iceland, 73

    • Domestic exchange, 36n28

    • Donne, John, 260

    • Dow Jones Stoxx 600 stock index, 564

    • Drehmann, Mathias, 28b

    • Duffie, Darrell, 130

    • Durbin, James, 541

    • Durbin-Watson d-statistic, 541

    • Dutch Central Bank, 93

    • Dybvig, Philip, 124

    • Dynamic conditional correlation, 410

    • Dynamic factor model, 436, 436n12

    • Econometric credit risk model, 475–78, 476nn2–4, 477n5, 477n7, 477nn9–10

    • Economic capital (EC), 486, 487–89, 487n8, 488f, 488nn9–13

    • Ehrmann, Michael, 562

    • Elsinger, Helmut, 34n26, 231, 243

    • Embree, Lana, 243

    • Emerging Market Bond Index (EMBI+), 456n8

      • JP Morgan, 371f

      • risk-neutral credit spreads and, 370–74, 372nn26–28, 372t, 373t, 374f

      • spreads, 367–70, 369n24, 370t

    • Emerging Market Bond Index Global, 369n24

    • Engle, Robert F., 410

    • Entropy

      • maximum, 489

      • modeling foundations, 509–11, 509n33, 511n34

      • See also Minimum cross-entropy distributor

    • Equity

      • indicators, 4

      • market index of Brazil, 105, 105n5

      • prices, 247, 283

      • pricing model, 248

      • S&P sector returns of, 128

      • Equity indicators-based approach, 247

        • See also Chile; Too-connected-to-fail

    • Erndos-Renyi graphs, 243

    • Erste, 528

    • Espinosa-Vega, Marco, 205

    • Estimated default probability, 384

    • Estonia, 155, 156t, 167t–169t, 171

    • EU banking groups, 97, 97n16, 283n3

      • contagion risk among, 326t–327t

      • cross-border loans of, 153, 153nn6–7

      • and subsidiaries, 167t–169t

      • See also Central, Eastern, and Southern Europe; Central and Eastern Europe

    • Europe, 528

      • central, 156t

      • interest rates in, 500

      • southern, 156t

      • stress tests in, 8, 14

      • See also Central, Eastern, and Southern Europe; Central and Eastern Europe; Southeastern Europe

    • European Banking Authority, 14, 14n3

    • European Central Bank (ECB)

      • solvency stress tests and, 60, 60n3, 97

      • statistics, 234

    • European Economic Area, 284n4

    • European Union (EU)

      • banks, 286b, 324t

      • contagion risk among banks in, 328t–329t cross-border banking groups and loans of, 153, 153nn6–7

      • financial institutions, 257t, 258t, 259t

      • GDP of, 457n9

      • government bond yields, 325t

      • home bias within, 309

      • initiatives at, 152n2

      • spillover risk within, 308–9, 308t, 309n26

      • stock market indices, 325t

    • Ex ante

      • loss distribution, 266

      • portfolio, 268n6

    • Expected default frequency (EDF), 561, 570, 577

      • of Chilean banking system, 252–54, 252nn6–7, 253n8, 253t, 254t

      • concept of, 413, 413n7

      • conditional, 255

      • CoRisk, 255

      • data, 252–54, 252nn6–7, 253n8, 253t, 254t

      • five-year, 252–54, 252n7

      • measures, 252, 252n4, 252t

      • MKMV, 562, 562n1, 563b, 563f, 564f

    • Expected loss (EL), 365

      • capital shortfall and, 422, 422n28

      • from default risk, 416–18, 416nn12–16, 417nn17–20, 418n21

      • of Denmark, 503, 504t, 505t

      • individual, 416–18, 417nn17–19

      • joint, 417–18, 417n20, 418n21

      • from U.K. banking sector, 422–27, 423nn29–32, 424f, 425f, 426f, 427t

    • Expected loss ratio (EL ratio), 418–20, 419f

    • Expected shortfall (ES), 266, 439n20

    • Ex post

      • loss distribution, 266

      • portfolio, 268n6

    • Extreme value theory (EVT)

      • approach, 4, 310

      • binomial logit model and, 303–4, 303f, 303nn8–9, 304nn10–11

      • data, 303n13, 304–5, 304n14, 304n17

      • empirical method of, 301–5, 301nn4–5, 302n6, 303f, 303nn8–9, 304n14, 304n17, 304nn10–13

      • introduction to, 279–80, 299–301, 300f, 300nn1–2, 301n3

      • method summary on, 249

      • models, 280

    • Fair value CDS, 421n24

    • Fair value option adjusted spread, 421n24

    • Fannie Mae, 104

    • Fast Fourier transform, 137, 143

    • Fazylov, Otabek, 562

    • Federal Deposit Insurance Corporation, 128, 129n11

    • Federal Reserve of New York, 264

    • Financial Accounting Standard, 535

    • Financial and Economic Environment Model, 128

    • Financial crisis, global (2007–2008), 1

      • characterization of, 124, 263

      • Chile during, 249–55, 251f, 252n2, 252n4, 252t, 253t, 254f, 255n11, 402–2, 403f

      • financial institutions during, 104, 104n1, 123

      • method summary on, 247

      • principle, 93

      • solvency and, 72, 72n4

      • U.K. during, 338–40, 338f, 339f, 340f, 341f

    • Financial institutions, 1, 266

      • Canadian, 257t, 258t

      • CCA of, 333–34, 350f, 353–56, 355b, 356f, 357f

      • CoRisk between, 257t, 258t, 259t

      • EU, 257t, 258t

      • failure of, 123

      • during financial crisis (2007–2008), 104, 104n1, 123

      • global, 253t, 272n16, 272t, 273t

      • in Latin America, 249, 253, 253t, 257t, 258t, 259t

      • loan portfolio of, 104–6, 105nn4–7

      • portfolio of, 104

      • total assets of, 533t–534t

      • U.S., 257t, 258t, 272n16, 272t

      • See also Nonbank financial institutions

    • Financial market infrastructures, 5, 8

    • Financial Sector Assessment Program (FSAP), U.S., 1, 449, 531, 570

      • adverse scenario of, 555, 556t

      • alternative scenario of, 555–56

      • application of, 92, 92n2

      • balance sheet-based approach and, 13

      • baseline scenario of, 555

      • coverage of, 24–25, 24n9

      • insurance sector and, 8

      • missions, 18

      • practice of, 25, 555n20

      • single-factor shock and, 556

      • soundness and structure of, 26–28, 26n10

    • Financial sector risk

      • bank regressions as, 570–72, 571t

      • cointegrating relationships and, 577, 578t

      • data, 562–64, 563b, 563f, 576t

      • DD and, 563, 563b

      • impact of, 561–62, 572–73

      • macroeconomic regression as, 566–70, 567nn4–7, 568t–569t

      • methodology, 564–66, 565f

      • method summary on, 561

    • Financial soundness indicator (FSI)

      • core, 32

      • solvency stress tests and, 66

    • Financial Soundness Indicators Compilation Guide, 30, 30n14, 31

    • Financial Stability Board, 208, 230

    • Financial Stability Report, 25

    • Financial Supervisory Authority. See Fjármálaeftirlitsins

    • Finland, 72n6

    • FinSoft, Inc., 104, 104n3, 124n1

    • FitchRatings, 105, 107t, 112, 116, 120, 289

    • Fjármálaeftirlitsins (FME), 72

      • Landsbanki Íslands hf. stress tests with, 76–79, 77t–78t

      • scenario assumptions of, 73

      • stress test combination of, 79, 79n16, 80t

    • Foglia, Antonella, 60

    • Forbes, Kristin, 301

    • Foreign banks, 25

      • CAR of domestic and, 165t

      • Chile’s exposure to, 250, 250t, 251t

      • claims of, 250, 250t

      • risk of, 527–28

    • Foreign currency

      • debt, 362n8, 365

      • domestic currency and, 364, 364f

      • of Iceland, 73

      • liabilities, 365n18, 366–67

      • risky, 365

    • Foreign exchange (FX)

      • assets and deposits, 36n28

      • depreciation in rate of, 32

      • direct risk in, 31–32, 31nn18–19, 32nn21–22

      • indirect risk in, 32–33, 32nn22–23

      • rate, 106, 502

      • risk, 196, 196t

    • Foundation Internal Ratings Based approach, 60

    • France

      • banks of, 274, 286b

      • data on, 155, 576t

    • Freddie Mac, 104

    • Friedman, Paul, 240, 240n13

    • Funding

      • by central bank, 93

      • costs, 98–99

      • gap of Landsbanki Íslands hf., 83, 84t–85t

      • liquidity, 71, 92

      • market, 98–99, 99n19

      • ratio of DB, 183

      • risks of Chilean banking system, 234

      • runoff rates with sources of, 97, 97n16

      • stable, 433

      • standards, 185n4

      • wholesale, 249, 282b

      • See also Net stable funding ratio; Required stable funding

    • Funding shock

      • balance sheet-based network analysis and, 232, 232f, 233f

      • impact of, 227t–228t

      • See also Credit-plus-funding shock

    • Furfine, Craig, 231

    • Gai, Prasanna, 243

    • Galai, Dan, 406

    • Gale, Douglas, 124

    • Gârleanu, Nicolae, 130

    • Garratt, Rod, 243

    • Gauthier, Celine, 240, 264, 267–68

    • Generalized autoregressive conditional heteroskedasticity, 252n2, 391–92, 392f

    • Generalized extreme value, 413–14, 414n9

    • Generalized method of moments (GMM)

      • Arellano-Bover System, 462, 477, 477nn9–10

      • Difference, 477, 477n7

    • Generally Accepted Accounting Principles, 13n1

    • German VDAX, 566n2

    • Germany, 99, 155, 486n6, 576t

      • banking systems in, 20, 234, 241, 253

      • banks of, 286b, 455n5

    • Gibbs sampler package WinBUGS, 557

    • Giese, Gotz, 140, 142

    • Glitnir Banki hf.

      • background on, 72

      • in receivership, 72–73, 72n6

    • Global Financial Stability Report (GFSR)

      • analyses of, 1, 93–94, 94n9, 410, 532

      • conclusions of, 124

      • data, 157, 557

    • Global Insight, 564

    • Godfrey, Leslie G., 541

    • Goldman Sachs, 181t, 272n16, 523

    • Gomez, G., 395

    • Goodhart, Charles A. E., 515, 528

    • Gordy, Michael, 63, 142n8

    • Gorton, Gary, 124

    • Government

      • assets, 364, 364f

      • guarantees/support of, 334–35

      • liabilities, 364, 364f

    • Government bond

      • EU, 325t

      • yields, 314t, 325t

    • Government of Brazil (GOB)

      • balance sheet, 108–9, 108nn15–16, 109nn17–18, 109t

      • bank simulation results, 112–20, 112nn31–33, 113t, 114t, 115n34, 115t, 116t, 117t, 118t, 119t, 120t

      • debt and default of, 105, 105nn6–7

      • expenses of, 109, 109nn17–18, 109t

      • integrated model of, 106–12, 106nn10–11, 107t, 108nn12–16, 109nn17–18, 109t, 110 nn20–23, 110t, 111nn24–30

    • Gram-Charlier expansion, 415

    • Granger causality, 411n5

    • Graph theory, 243

    • Great Depression, 263

    • Great Recession, 567

    • Greece, 155

    • Gropp, Reint, 248, 279, 282–83, 286b, 291, 300–301

    • Gross Domestic Product (GDP)

      • of Brazil, 454, 463

      • of Chile, 250, 250t

      • contraction in, 456

      • credit and, 564–66, 567, 568t–569t

      • of EU, 457n9

      • evolution of, 464, 467f, 474f

      • financial regression on, 567n7

      • growth of, 158, 474f, 535, 577

      • macroeconomic assumptions on, 556t

      • real, 557

      • of U.S., 457n9

      • variables of, 20

      • See also Credit over GDP

    • G20

      • Data Gaps Project of, 8

      • report, 410n1

      • spending, 264

    • Haaf, Hermann, 142

    • Haldane, Andrew G., 411, 411n4

    • Hall, Peter, 417, 438

    • Hardy, Daniel, 60, 62, 63

    • Hartmann, Philipp, 301

    • Hasan, Maher, 62, 63–64, 67, 95

    • Hattori, Masazumi, 243

    • Hausman, Jerry A., 541

    • Hausman specification, 541

    • Haver economic database, 395n5

    • Herfindahl-Hirschman Index (HHI), 63–64, 63n14

    • Heřmánek, Jaroslav, 34n26

    • Herstatt Bank, 230, 264, 274

    • Herzegovina, 155, 159, 167t–169t

    • Hesse, Heiko, 96, 99

    • Hilbers, Paul, 18, 24, 39b

    • Hlaváček, Michal, 34n26

    • Hoelscher, David, 153

    • Hofmann, Boris, 515

    • Hongkong and Shanghai Banking Corporation (HSBC), 423n30, 524, 528

    • Hong Kong Monetary Authority, 93, 125t

    • Hong Kong SAR, 28b

    • House

      • prices, 341, 341n1, 559, 559n30, 559t

      • price shock, 347–49, 349f

    • Huang, Xin, 410, 521n18

    • Hui, Cho-Hoi, 101, 130n13

    • Hull, John C., 107–8, 108n13

    • Hungary, 155, 156t, 167t–169t

    • Iceland, 14

      • Althing (parliament) of, 72

      • banking crisis background of, 72–73, 72n4, 72n6

      • case study, 72–87, 72n4, 72n6, 73nn10–12, 74nn14–15, 74t, 75t, 76t, 77t–78t, 79nn16–17, 80t, 81t–82t, 84t–85t, 86n18, 86t

      • domestic and foreign currency of, 73

      • See also Fjármálaeftirlitsins; Glitnir Banki hf.; Landsbanki Íslands hf.; Seðlabanki

      • Icesave retail deposit product, 72n6

      • Imai, Kenji, 404, 407

      • “IMF Exploring Insurance Levy on Banks,” 264n2

      • IMF Monetary and Capital Markets Department Distance-to-Default Database, 286

    • Immediate borrower basis (IBB)

      • Chilean banking system and, 250, 250t

      • data, 213–14, 213n10, 214f, 227, 227t–228t

      • for international claims, 213n10

      • simulations, 213

    • Impavido, Gregorio, 186n10, 189n13

    • Impulse response function (IRF), 388, 400–402, 401f

    • Income

      • GOB balance sheet and, 108–9, 108nn15–16, 109nn17–18, 109t

      • GOB’s net noninterest, 109, 109nn17–18, 109t

      • groups, 343n5

      • interest, 23

      • shock, 346f, 347

      • shock in rate of, 345f–346f, 347

      • solvency stress tests and, 61–62, 62nn6–7, 62t

      • statement, 25–26, 25b

      • See also Debt service-to-income

    • Incremental portfolio

      • approach and TCTF, 265–67, 266f

      • institutional, 266

      • Indicador Mensual de Actividad Económica (IMACEC), 395–97, 396t, 399

      • Indice de Precios Selectivo de Acciones (IPSA), 395–97, 396t

    • Inflation

      • assumptions, 185, 185n3, 186, 186n8

      • shock, 197, 197n30, 197t

    • Institute of International Finance (IIE), 152

    • Insurance, 195, 298, 378

      • companies, 25, 283

      • deposits, 230, 264

      • extension of, 186

      • premium, 94n9, 412t, 444t

      • sector, 2, 8, 25

      • See also American International Group

    • Interbank

      • borrowing, 249

      • exposure model, 211–14, 211f, 211nn4–5, 212f, 212n6, 214f, 214n11

      • exposures, 206, 206n3

      • “macro” contagion test, 35, 35f, 35n27

      • markets, 282b

      • “pure” contagion test, 34–35, 34nn25–26

      • risk and GOB model of default, 103, 106–12, 106nn10–11, 107t, 108nn12–16, 109nn17–18, 109t, 110nn20–23, 110t, 111nn24–30

      • See also London interbank offered rate

    • Interconnectedness

      • capital charge and, 263–64, 267

      • degree of, 263

      • See also Too-connected-to-fail

    • Interest cover ratio (ICR), 350–54, 353f

    • Interest rate

      • bank-to-bank spread, 108n12

      • direct risk in, 30–31, 30nn14–15, 31nn16–17

      • in Europe, 500

      • indirect risk in, 31

      • rising, 398, 400

      • shock and U.K., 347, 348f

      • short-term, 171, 175

      • spreads, 106

    • Internal Ratings Based (IRB), 160n18, 177

    • International Accounting Standards, 505 International Consolidated Banking Statistics, 213

    • International Financial Reporting Standards, 13n1, 304n14, 505

    • International Financial Statistics, 564

    • International Monetary Fund (IMF)

      • assessments of, 72n4, 570

      • focus of, 5–9, 8f

      • information gaps and quality of, 8–9

      • initiatives of, 208

      • methodology of, 5

      • policies and reports of, 8, 152n4

      • stress testing at, 1–9, 2f, 3f, 3t, 5f, 6t, 7t, 8f

      • See also Financial Sector Assessment Program; Global Financial Stability Report

    • Intesa, 528

    • Investment banks, 523n20

    • Ireland

      • banking in, 283–84, 283n3, 284nn4–6, 285f

      • contagion risk determinants in, 287t, 291–98, 292n9, 292t, 293n10, 293t, 294f, 295t, 296f, 296t

      • contagion risk in, 281–84, 282b, 282nn1–2

      • U.K. and, 283

      • U.S. and, 283

      • See also Bank of Ireland

    • Irish Financial Services Center, 281, 284, 284n5

    • Italy

      • banks of, 286b

      • data on, 155, 576t

    • iTraxx Crossover, 564

    • Jain, Sameer, 407

    • Jančar, Martin, 28b

    • Jaynes, Edwin T., 510

    • Jobert, Arnaud, 248

    • Joint probability of distress (JPoD), 515

      • banking systems and, 515–16, 516f

      • BSI and, 522f, 523f, 525–26

      • BSM and, 520

      • default and, 414

      • model, 412t

    • Jones, Matthew T., 18, 24, 39b

    • JP Morgan, 181t, 272n16

      • as BHC, 523, 528

      • EMBI+, 371f

    • Kapadia, Sujit, 243

    • Karolyi, G. Andrew, 291, 301

    • Kaupthing Bank hf.

      • background on, 72

      • in receivership, 72–73, 72n6

    • Kaupthing Edge, 72n6

    • Kite network, 205–6, 206f

    • Klaar, Andres, 112, 112n32

    • Koenker, Roger, 268

    • Koeva-Brooks, Petya, 562

    • Kong, Janet Q., 248

    • Kovner, Anna, 124

    • Krackhardt, David, 205–6, 206f

    • Kullback, Solomon, 492b–493b, 510

    • La Caixa, 284

    • Lagrange multiplier test, 541

    • Landsbanki Íslands hf. annual reports of, 73

      • assets of, 73–74, 74t

      • background on, 72

      • CAR of, 73

      • Consolidated Financial Statements of, 73

      • funding gap of, 83, 84t–85t lessons from, 83–87, 86n18

      • liquidity position and situation of, 74, 74nn14–15, 75t, 79–83, 79n17

      • liquidity risk of, 74–76, 75t, 761

      • operations of, 72n12, 73–74

      • in receivership, 72–73, 72n6

      • shock within, 79–83, 79n17, 81t–82t

      • stress test combination of, 79, 79n16, 80t

      • stress tests with FME shock, 76–79, 77t–78t

      • summary results of, 83, 86t

    • Latin America

      • banks and sovereigns in, 4, 521, 528

      • financial institutions in, 249, 253, 253t, 257t, 258t, 259t

      • reforms in, 264n1

    • Latvia, 155, 156t, 167t–169t Least squares, 145

    • Lehar, Alfred, 34n26, 231, 240, 264, 267–68

    • Lehman Brothers, 96, 104, 253, 264, 266, 269, 269f, 523–24

    • Lending standards, 558–59, 558f

    • Leverage

      • corporate, 32, 32n23

      • implied ratio, 416n13

      • ratio, 64n20

    • Levonian, Mark, 406

    • Li, David X., 271n14

    • Li, Fuchun, 271n15

    • Liabilities

      • book value of, 361

      • contingent, 214n11, 420–22, 420f, 420n22, 421nn23–25, 422nn26–27

      • contractual, 361, 362

      • correlation between assets and, 199

      • DB and, 196, 196n21

      • domestic currency, 364, 364f

      • GOB balance sheet and, 108–9, 108nn15–16, 109nn17–18, 109t

      • government, 364, 364f

      • layer of, 384, 384nn42–43, 385t

      • management of, 380

      • monetary authority, 364, 364f

      • reevaluation of, 106

      • See also Actuarial liabilities; Contingent claims analysis

    • Likelihood-ratio tests, 541

    • Linear combinations of ratios of spacing method, 438

    • Liquidity

      • cash flow-based tests, 92

      • contagion, 36, 36n30

      • crises, 92–93, 92n5

      • funding, 71, 92

      • indicators, 23

      • intragroup, 153, 153n5

      • as low-frequency-high impact events, 92–93, 92n5

      • management, 152

      • market, 71

      • from outside, 35–36

      • run, 36n28

      • shock, 199, 211–12, 211f, 211n4, 212f, 212n6

      • shortages, 124n2, 131, 131f, 131t

      • short-term, 71

    • Liquidity at Risk, 94, 94n10

    • Liquidity coverage ratio, 94, 97–98

    • Liquidity Ratio for Credit Institutions, 73n10, 79, 79n16

    • Liquidity risk, 14

      • assessment of, 93–94, 93n8, 94nn9–10, 95t

      • BCBS on, 71n2, 86–87

      • considerations and motivation for, 92–93, 92n5, 93nn6–7

      • focus on, 72, 72n4

      • general concepts of, 92–96, 92n5, 93nn6–8, 94nn9–11, 95f, 95t, 96t

      • of Landsbanki Íslands hf., 74–76, 75t, 76t

      • method summary on, 123

      • shock, 71

      • solvency risk and, 91–92, 98–99, 99n19

      • stressed input values and, 441b systemic, 123–32, 124nn1–2, 125t, 126nn3–4, 127f, 128n5, 128n9, 129nn11–12, 130 nn13–16, 130t, 131f, 131t, 132t

      • tests, 35–36, 36f, 36nn28–30

      • See also Iceland; Systemic Risk-Adjusted Liquidity

    • Liquidity stress tests

      • benchmark scenarios of, 99–100, 99n20, 99t

      • of BoE, 125t

      • BU or TD, 94, 95t

      • data for, 126–28, 127f

      • design of, 96–100, 96nn12–14, 97n16, 97n18, 98t, 99nn19–20, 99t framework of, 92, 92nn2–3

      • goal and outcome of, 94

      • Iceland case study and, 72–87, 72n4, 72n6, 73nn10–12, 74nn14–15, 74t, 75t, 76t, 77t–78t, 79nn16–17, 80t, 81t–82t, 84t–85t, 86n18, 86t

      • methodological aspects of, 93–94, 93n8, 94nn9–10, 95t

      • method summary on, 71, 91

      • modeling steps of, 126, 127f

      • next-generation, 91–92, 92nn2–3, 94–96, 95f, 96t

      • reverse, 94, 94n11, 96, 96n14

      • Seðlabanki on, 73, 73n11

      • for U.S. banking system, 128, 128n5, 132

      • See also Iceland

    • Lithuania, 155, 156t, 167t–169t

    • Litzenberger, Robert H., 416, 434

    • Lloyd’s Banking Group, 423n30

    • Loan loss reserve, 160

    • Loan portfolio

      • of Brazilian banking sector, 460t

      • concentration modeling, 129

      • corporate, 128, 128n9

      • of financial institutions, 104–6, 105nn4–7

      • individual, 128–29

      • modeling, 109–10, 110nn20–23, 110t

    • Loans

      • accounting information on, 45

      • business, 110, 110nn22–23

      • classified, 55

      • consumer, 110, 110nn22–23, 558

      • credit risk model of, 128–29, 128n9

      • cross-border banking groups and, 155n10

      • EU cross-border, 153, 153nn6–7

      • losses from, 23, 73

      • NPLs and loss provisions of, 479–80, 480t

      • performing, 47–52, 50t, 51t, 55, 57t

      • short term increases in, 48

      • See also Nonperforming loans

    • Loan-to-value (LTV), 129, 342

    • Lo Duca, Marco, 279, 282–83, 286b, 291, 300–301

    • London Interbank Offered Rate, 124, 436n12

    • Longevity shock, 197–98, 198f, 198t

    • Longin, Francois, 301

    • Longstaff, Francis A., 407

    • Long Term Capital Management, 264, 274, 391

    • Loss distribution

      • for CSFP, 145, 145t

      • ex ante, 266

      • ex post, 266

    • Loss given default (LGD)

      • of Brazilian banking sector, 468

      • CESE and, 160, 177, 177t, 181t

      • PD and, 62–63, 62n8, 63nn9–10

      • of U.K., 344–46, 346n9, 347t

    • Lowe, Philip, 515

    • Lucas, Robert E., 28b

    • Lucas critique, 28b

    • Luna, Leonardo, 395

    • Lütkebohmert, Eva, 63

    • Macroeconomic assumptions, 556t

    • Macroeconomic data, 513–14

    • Macroeconomic developments, 474–75, 474f

    • Macroeconomic factors, 334

    • Macroeconomic model, 105n5

      • BU approach to, 19f, 21–22

      • credit risk and, 28b

      • external shock and, 19f

      • TD approach to, 19f, 21–22, 46n2

    • Macroeconomic regression, 566–70, 567nn4–7, 568t–569t

    • Macroeconomic scenarios

      • in Denmark, 494t, 497–500, 498f, 499f, 499t

      • of NPLs, 479

    • Macroeconomic variables, 395–404, 395f, 395nn5–6, 396t, 397n7, 397t, 398f, 401f, 402f, 403f

    • Macro-financial approach, 4–5, 5f

      • introduction to, 449–51, 450f

      • process, 450

    • Macro Financial Risk, Inc., 367n21

    • Macro-Financial Risk model (MfRisk), 367, 367n21, 384–85, 384n41

    • “Macro” interbank contagion, 34, 35, 35f

    • Macro model, 456–57, 456f, 456nn7–8, 457nn9–11, 457t, 458t, 459f

    • Macroprudential policy and surveillance (MPS)

      • contribution approach to, 410, 410n3, 411t

      • participation approach to, 410, 410n3, 411t

      • systemic risk in, 410–11, 410n1, 411n4

    • Macroprudential stress test

      • alternative scenario of, 548–51, 552t, 553t

      • analysis of, 531–34, 532nn2–7, 533t–534t, 534f

      • assumptions and methodology of, 535–38, 535nn8–9, 536f, 537f, 537t

      • balance sheet expansion and, 543–46, 547f, 548f

      • baseline scenario of, 534–48, 535nn8–9, 536f, 537f, 537t, 538n10, 538t, 539t, 540f, 540n11, 541f, 541n16, 542f, 543n18, 544f, 545f, 546f, 547f, 548f, 548n19, 549t, 550f

      • for BHC, 523nn2–7, 532

      • capital shortfall and, 546–48, 548n19, 549t, 550f

      • earnings profiles and, 537f, 538–41, 539t, 540f, 540n10, 541f

      • retained earnings and, 541–43, 541n16, 543n18, 544f, 545f, 546f

      • securities write-downs and, 538, 538n10, 539t

    • Maechler, Andrea, 171, 566n2

    • Mager, Ferdinand, 63

    • Marginal expected shortfall (MES), 411n4

    • Mark, Robert, 406

    • Market

      • data, 570n11

      • equity index of Brazil, 105, 105n5

      • evaluation, 414

      • funding, 98–99, 99n19

      • liquidity, 71

      • returns, 488n12

      • risk model, 450

      • stock, 247, 314t, 325t

      • value, 361

    • Market-implied capital adequacy ratio, 418–20, 419f, 423

    • Market-implied capital assessment, 418–20, 419f

    • Market implied default probability (MIDP), 384

      • CDS and, 372, 372n27

      • estimation of, 373

    • Market price-based approach

      • comparison of, 3t

      • operational considerations of, 5, 5f, 6t, 7t

      • utilization of, 4, 5f

    • Market prices

      • of assets, 97–98, 97n18

      • for CDS, 268

    • Martinez, Soledad, 153n7

    • Mathieson, Donald J., 301

    • MATLAB, 144

    • Maurer, Martin, 231, 237

    • Maximum domain of attraction, 417

    • Maximum likelihood (ML)

      • estimators, 490

      • systemic CCA and, 417, 417n18

    • Maxwell, William, 128

    • McGuire, Patrick, 213

    • McLiesh, Caralee, 63

    • Mean-squared-error, 490

    • Melchiori, Mario R., 142, 143

    • Merrick, Andrew, 124

    • Merrill Lynch, 181t, 523

    • Merton, Robert C., 4, 247, 271, 271n14, 302, 333, 383–85, 383n38, 384n40, 388, 390, 563b

      • See also Black-Scholes-Merton model

    • Merton model, 393, 407, 414, 414n11, 416

    • MetLife Assurance Limited, 196n21

    • Milevsky, Moshe, 189n13

    • Minimum cross-entropy distributor, 492b–493b, 495b–496b

    • Mitra, Srobona, 72n4

    • MKMV CreditEdge, 423n30

    • Moerman, Gerard, 279, 286b, 291, 300–301

    • Molyneux, Philip, 562

    • Monte Carlo approach, 93, 103, 106n11, 557

      • evaluation of, 378–80, 378n34, 379f

      • implementation of, 377b

      • simulation, 103, 373t, 374, 376–78, 376n31, 377b, 377nn32–33, 378f

      • size of, 106n11

    • Monthly Report on Financial Institutions, 237

    • Moody’s Investor Services, 107t, 112, 234

    • Moody’s KMV (MKMV)

      • data, 247–48, 252, 252t, 264, 268

      • EDF, 562, 562n1, 563b, 563f, 564f

      • estimates, 388, 393

      • framework, 488n9

    • Moretti, Marina, 476

    • Morgan Stanley, 272n16, 523

    • Morgan Stanley Capital International (MSCI), 305, 436n12

    • Morris, Stephen, 210

    • Mortgages, 284

      • delinquent, 555

      • LTV, 129, 342

      • real estate, 104n1, 106n10

      • subprime, 250, 263

    • MSCI All-Country Europe Index, 305

    • MSCI All-Country World Index, 305

    • Multivariate extreme value distribution, 417

    • Multivariate Generalized AutoRegressive

      • Conditional Heteroskedasticity approach, 417n20, 439n19

    • Mutual funds, 237

    • National Bank of Bankistan (NBB), 24

      • back-testing and, 27–28, 27f

      • ranking system of, 27, 27f

      • step function and, 27, 27f

    • Nationwide, 423n30

    • Nelson, Benjamin, 411, 411n4

    • Net foreign investment, 500

    • Netherlands, 155, 234

      • banks of, 125t, 286b, 500, 500n28

      • contagion risk of, 283

    • Net stable funding ratio

      • boundary, 433

      • measurement, 432–36, 432n3, 434n9, 436f

      • sources, 94, 97

    • Network analysis approach

      • application of, 4, 206–8, 206nn3–4

      • introduction to, 205–8, 206f, 206nn3–4, 207f

      • method summary on, 205

      • operational considerations of, 5, 5f, 6t, 7t

      • policy reflections on, 207–8

    • Net worth, 26

    • Nier, Erlend, 243

    • Nonbank financial institutions (NBFIs), 5–8

      • distress of, 514

      • exposures to, 30

      • importance of, 237

    • Nonperforming loans (NPLs)

      • availability of, 64, 64n16

      • background on, 474–75, 474f, 475n1

      • bank-to-bank changes in, 28b, 29, 29n12

      • Brazilian banking sector, 454, 454n1, 458–63, 461nn13–14, 461t, 462f, 463–64, 467f

      • calibration of, 158–60, 158n12, 159n13, 159t, 160n14

      • CAR of, 480–81, 481t

      • CESE and, 156–60, 158n12, 158t, 159t, 160n14

      • changes in, 33, 157

      • data, 475

      • dependent variable of, 476, 476nn2–4

      • econometric credit risk model of, 475–78, 476nn2–4, 477n5, 477n7, 477nn9–10

      • estimation procedure on, 477–78, 477n5, 477n7, 477nn9–10, 478n11

      • evolution of, 458–59

      • increase in, 28b, 29, 29n12

      • independent variable of, 476–77

      • level of, 45

      • loan loss provisions of, 479–80, 480t

      • macroeconomic and financial developments of, 474–75, 474f

      • macroeconomic scenarios of, 479

      • method summary on, 473

      • projection of, 473–74, 479–80, 480t

      • recovery rate of, 110, 110n22

      • regression analysis of, 158, 158t, 173, 173t

      • sensitivity of, 459

      • shock of larger magnitude to, 47, 52–55, 54t

      • shock to, 47–55, 50t, 51t, 54t, 56t

      • stocks and, 160n15

      • stress test design of, 478–79, 478f

      • stress test outcome of, 479–81, 480nn13–14, 480t, 481t

    • Norges Bank, 23, 33b

    • Northern Rock (United Kingdom)

      • case, 210, 210n1

      • failure of, 97

    • Norway, 155

    • Notes to the Consolidated Accounts, 86

    • Oesterreichische Nationalbank, 92–93, 93n8, 136n1

    • Off-balance sheet

      • exposures, 232–33, 233f

      • positions, 26

    • Office of the Comptroller of the Currency, 128

    • Office of Thrift Supervision, 128

    • Ong, Li Lian, 72n4, 99, 171

    • Option pricing, 247, 333

      • See also Black-Scholes-Merton model

    • Ordinary least squares, 255, 462

    • Organization for Economic Cooperation and Development, 96n12

    • Out-of-the-money, 522

    • Overnight indexed swap, 124

    • Padilla, Pablo, 515

    • Pagan, Adrian R., 541

    • Papaganagiotou, Panagiotis, 15, 104

    • Pazarbasioglu, Ceyla, 8

    • Pedersen, Lasse H., 130, 410

    • Pension

      • funds, 237

      • model plan for, 190, 191t–192t, 193f–194f, 195t

      • real plan for, 190, 191t–192t, 193f–194f, 195t

    • Pesola, Jarmo, 28b

    • Pickands, James, 417

    • Pillar 3 reports, 14, 14n3

    • Pirotte, Hugues, 407

    • PoDs derived from CDS spreads (CDS-PoDs), 522

    • Poisson approximation, 137–38, 145, 145t

    • Poland, 152n4, 155, 156t, 167t–169t

    • Poon, Ser-Huang, 301

    • Popov, Alexander, 152–53

    • Portfolio

      • banks’, 8, 104–6, 105nn4–7

      • Brazil’s aggregation bias, 464–66, 465n15, 468f, 469f, 469t, 470t

      • ex ante, 268n6

      • ex post, 268n6

      • of financial institutions, 104

      • TCTF and incremental, 265–67, 266f

      • See also Incremental portfolio; Loan portfolio

    • Portfolio credit risk

      • of balance sheet-based approach, 14–15

      • EC and, 486, 487–89, 487n8, 488f, 488nn9–13

      • improvement of, 489–94, 490nn16–18, 491b–492b, 492b–493b, 494t

      • information restrictions binding, 488–89, 489f, 489n14

      • measurement, 485, 489–94, 490nn16–18, 491b–492b, 492b–493b, 493n23, 494t

      • PLD and, 487–89, 487n8, 488f, 488nn9–13

      • UL of, 486

    • Portfolio loss distribution (PLD)

      • estimation of, 486

      • portfolio credit risk and, 487–89, 487n8, 488f, 488nn9–13

    • Portfolio multivariate density (PMD), 486

      • CIMDO and, 502–4, 503f, 504t

      • CoPoD, 502–4, 503f, 504t

      • of Denmark, 502–3, 503f, 504t

    • Principal component analysis, 388, 397–99, 397t, 398f

    • Probability

      • Bernoulli events and, 144, 145t

      • CreditRisk+ model with known, 138

      • CreditRisk+ model with nonrandom default, 137

      • CreditRisk+ model with random default, 138–39, 139n6, 146–47, 146f, 147f

    • survival, 184–85, 184n2

    • Probability generation function, 149

    • Probability Integral Transformation, 494, 516

    • Probability of default (PD), 271, 271nn12–13

      • estimation of, 143n19

      • LGD and, 62–63, 62n8, 63nn9–10

      • rankings and, 26–28, 26n10, 27f

      • ratings and, 23

      • RWA and sensitivity of, 63, 63nn11–12

      • sovereign risk and, 384, 384nn40–41

      • stress tests and, 39, 40f, 41f

      • See also Conditional probability of default; Risk-neutral default

    • probability Probability of distress (PoD)

      • of banks, 515, 522

      • BSMs and, 515, 516f

      • changes in, 514

      • sovereign credit risk and, 366

    • Profits

      • of banks, 22–23

      • components of, 23

      • excess, 160–61, 160t

    • Projected benefit obligation (PBO), 189

    • Projected benefit obligation choice of method (PBOcd), 195

    • Puhr, Claus, 62, 63–64, 67, 95

    • Quantile regression

      • CoRisk and, 254–53, 255n11, 268n7

      • integration of, 268n7

    • quasi-Internal Ratings Based approach (QIRB)

      • method, 60

      • RWA, 63nn15–19, 64, 65f

    • Quintos, Carmela E., 301

    • Rawkins, Paul, 112, 112n32

    • Real estate

      • assets, 129

      • mortgages, 104n1, 106n10

      • prices, 497–500, 499t

      • See also Commercial real estate; Residential real estate

    • Reduced-form approach (RA), 488n13

    • Regression

      • of assets, 537f

      • bank, 570–72, 571t

      • credit, 578t

      • GDP and financial, 567n7

      • macroeconomic, 566–70, 567nn4–7, 568t–569t

      • model, 565–66, 565f, 566n2

      • See also Quantile regression; Vector error correction model regression

    • Regression analysis

      • of NPLs, 158, 158t, 173, 173t

      • of ROAs, 158, 158t

      • of sovereign credit risk, 370–74, 370n25, 372nn26–28, 372t, 373t, 374f

    • Regulatory capital, 24n8

      • Basel III on, 264

      • TCTF and, 263

    • Reiss, Oliver, 142

    • Required stable funding (RSF)

      • components of, 433–34

      • covariance of, 435f

      • factors, 442t

      • value of, 434

      • volatility of, 441b

    • Reserve management

      • evaluation of, 378–80, 379f

      • framework for, 380–81, 380nn35–36, 381n37

      • sovereign credit risk and, 378–81, 379f, 380nn35–36, 381n37

    • Residential real estate (RRE)

      • charge-off rate, 558

      • losses, 535–36, 537t, 551, 552t

    • Retirement

      • benefit assumptions and DB, 201

      • members and actuarial liabilities, 186, 186nn7–9, 187t, 188t, 201

      • See also Actuarial liabilities; Defined benefit

    • Retirement benefit obligation (RBO), 189, 189n14

    • Return on assets (ROA)

      • annualized, 532, 532n6

      • calibration of, 158–60, 158n12, 159n13, 159t, 160n14

      • CESE and, 156–60, 158n12, 158t, 159t, 160n14

      • changes in, 157

      • regression analysis of, 158, 158t

    • Rigabon, Roberto, 301

    • Riley, David, 112, 112n32

    • Ring-fencing

      • absence of, 152

      • full, 153–54, 155, 155t

      • impact of, 151–54, 152n4, 152nn1–2, 153nn5–7

      • method summary on, 151

      • near-complete, 153–54, 155, 155t

      • no, 153–54, 155, 155t

      • partial, 153–54, 155, 155t

      • scenarios and CN, 160–63, 160n15, 160nn17–19, 161n20, 162f, 163f

      • types of, 153–54, 155, 155t

    • Risk

      • balance sheet-based approach and portfolio, 14–15

      • Brazil’s bank ratings and, 103, 115–21, 117nn35–36, 118t, 119t, 120t

      • capital charge, 267–68, 268n6

      • credit shock and concentration, 30

      • data on financial sector, 562–64, 563b, 563f, 576t

      • direct interest rate, 30–31, 30nn14–15, 31nn16–17

      • of foreign banks, 527–28

      • FX, 196, 196t

      • FX direct, 31–32, 31nn18–19, 32nn21–22

      • FX indirect, 32–33, 32nn22–23

      • GOB model of default and interbank, 103, 106–12, 106nn10–11, 107t, 108nn12–16, 109nn17–18, 109t, 110nn20–23, 110t, 111nn24–30

      • indicators, 390–95, 391f, 393f, 394f, 395f570n11

      • indirect interest rate, 31

      • measures of CCA, 388–95, 389f, 390n3, 391f, 392f, 393f, 394f 395f

      • mitigation, 380n37

      • model of market, 450

      • profile, 414

      • sensitivity and solvency stress tests, 60–61, 60n4, 61f

      • simulation model of banks, 106–8, 106nn10–11, 107t, 108nn12–16, 109nn17–18, 109t

      • TCTF, 229–30

      • transfer data, 213–14, 214f

      • See also Contagion risk; Credit risk; Debt at risk; Liquidity risk; Ultimate risk basis

    • Risk Assessment Model for Systemic Institutions (RAMSI), 60, 93, 99n19, 130n13, 423

    • RiskMetrics CreditGrades model, 407

    • Risk-neutral default probability (RNDP), 247, 366, 375n30

      • CCA and, 393, 393f, 394f 395

      • CDS and, 422, 422n27

    • Risk transfer

      • algorithm with, 212–13, 213n7

      • algorithm without, 212

      • data, 213–14, 214f

      • presence of, 212, 218–23, 222f, 222n14, 223f,224f

      • transmission of, 218–23, 222f, 222n14, 223f, 224f

    • Risk-weighted assets (RWA), 160

      • accounting information on, 45

      • adjustment of, 60

      • calculation of, 480

      • for credit risk, 63

      • decline of, 47, 47n3

      • name concentration and, 63–64, 63n14

      • QIRB, 63nn15–19, 64, 65f

      • sensitivity of asset correlations, 63, 63n13

      • sensitivity of PDs to, 63, 63nn11–12

      • translation of, 63nn15–19, 64, 65f

      • value of, 28b, 29, 29n12

    • Roberts, Tom, 243

    • Rockinger, Michael, 301

    • Rohatinski, Željko, 152n4

    • Romania, 155, 156t, 159, 167t–169t, 171

    • Royal Bank of Scotland (RBS), 423n30

    • Russia, 155, 156t, 158n12, 159t, 167t–169t, 171

      • capital controls in, 365

      • crisis in 1998, 391

    • Santander, 528

    • Santander Chile, 256, 260n14

    • Santander U.K., 423n30

    • Sargan test, 477, 477n10

    • Satellite model, 19f

    • Schleifer, Andrei, 63

    • Schmeider, Christian, 60, 62, 63–64, 67, 95–96, 99

    • Schmeider, S. Philipp, 63

    • Schmitz, Stefan W., 101

    • Schoar, Antoinette, 124

    • Schoenmakers, John, 142

    • Scholes, Myron S., 4, 247, 271, 286b, 302, 333, 388, 563b

      • See also Black-Scholes-Merton model

    • Schumacher, Liliana, 15, 94, 104

    • Schwartz, Eduardo S., 407

    • Schwartz information criterion, 399

    • ScotiaBank, 256, 528

    • Securities

      • mortgage-backed, 104n1

      • prices, 240, 240n13

      • write-downs, 538, 538n10, 539t

    • Seðlabanki

      • on króna, 73

      • on Liquidity Ratio for Credit Institutions, 73n10, 79, 79n16

      • on liquidity stress tests, 73, 73n11

      • receivership by, 72–73, 72n6, 73nn10–11

      • on solvency risk, 73, 73n10

      • stress test combination of Landsbanki Íslands hf. and, 79, 79n16, 80t

    • Segoviano, Miguel A., 489, 492b–493b, 494, 510, 515, 518, 528

    • Senior Loan Officer Opinion Survey of Bank Lending Practices, 558–59, 558f

    • Serbia, 155, 156t, 167t–169t

    • Shannon, Claude E., 509–10

    • Shapley values, 268n6

    • Shared National Credits Review, 128

    • Sheldon, George, 231, 237

    • Shin, Hyun Song, 210

    • Shock

      • balance sheet, 48

      • to banking system, 47, 52, 53t

      • to banks, 47, 52, 53t, 55

      • common, 440, 441b

      • DB, asset, 195–96, 196n20, 196t

      • DB and liability, 196, 196n21

      • external, 19f

      • firm-specific, 440

      • FME, 76–79, 77t–78t

      • house price, 347–49, 349f

      • income, 346f, 347

      • inflation, 197, 197n30, 197t

      • interest rate, 196–97, 196t, 197t

      • within Landsbanki Íslands hf., 79–83, 79n17, 81t–82t

      • of larger magnitude to NPLs, 47, 52–55, 54t

      • liabilities and, 196, 196n21

      • liquidity, 199, 211–12, 211f, 211n4, 212f, 212n6

      • liquidity risk, 71

      • longevity, 197–98, 198f, 198t

      • to multi-assets, 199

      • to NPLs, 47–55, 50t, 51t, 54t, 56t

      • risk transfer, 232–33, 233f

      • short-term, 48

      • single-factor, 556

      • transmission of, 478, 478f

      • U.K. interest rate, 347, 348f

      • volatility, 441b

    • Sibert, Anne, 74–76

    • Sistema Especial de Liquidaçáo e Custodia, 457

    • Sklar, Abe, 417n20, 519

    • Slack, Graham, 18, 24, 39b

    • Slovakia, 155, 156t, 159, 167t–169t

    • Slovenia, 155, 156t, 159, 167t–169t

    • Small- and medium-sized enterprises, 486–87, 487n6

    • SNL Financial, 532n5, 534

    • Social networks, 205

    • Societe Generale, 274, 528

    • Solé, Juan, 205

    • Solnik, Bruno, 301

    • Solvency, 33

      • financial crisis (2007–2008) and, 72, 72n4

      • of firm, 414

      • See also Contagion risk

    • Solvency risk

      • liquidity risk and, 91–92, 98–99, 99n19

      • method summary on, 123

      • modeling of, 129–30, 129nn11–12, 129t, 130nn13–16

      • modeling results of, 130–32, 131f, 131t, 132t

      • Seðlabanki on, 73, 73n10

      • systemic, 123–32, 124nn1–2, 125t, 126nn3–4, 127f, 128n5, 128n9, 129nn11–12, 130nn13–16, 130t, 131f, 131t, 132t

      • value of, 362–63, 362nn8–9

    • Solvency stress tests, 35

      • architecture of, 64–66, 65f

      • credit risk and, 62

      • dimensions of, 60

      • ECB and, 60, 60n3, 97

      • execution of, 66–67, 68f

      • framework of, 59–61, 60nn1–4, 61f, 66, 67f

      • FSI and, 66

      • income and, 61–62, 62nn6–7, 62t macro scenario of, 66

      • methodology of, 61–68, 61n5, 62nn6–7, 62t, 63nn11–14, 64nn15–20, 65f, 66f 66n21, 67f, 68f

      • method summary on, 59

      • next-generation of, 60, 60n2

      • risk sensitivity and, 60–61, 60n4, 61f, scope and, 60–61, 61f

      • stress test metric and, 61, 61n5

      • technical overview of, 64–67, 65f, 66f 66n21, 67f, 68f

      • use of, 60–61, 61f

    • Soramaki, Kimo, 243

    • Souissi, Moez, 240, 264, 267–68

    • Southeastern Europe (SEE), 156t, 158n12

    • Souto, Marcos R., 104, 108, 110, 112n31

    • Sovereign assets, 362–64, 362n5, 362nn8–9, 363f,383

    • Sovereign balance sheet

      • adjusted, 378n34

      • CCA of, 364–66, 364f, 364nn10–11, 365n12, 365nn16–18

      • consolidation of, 364, 364f, 364nn10–11

      • seniority of, 364–65, 365n12, 365nn16–17

      • value, volatility and, 365–66, 366n18

    • Sovereign credit risk, 103–6, 111, 111nn25–29

      • degree of, 367–74, 367nn21–23, 368f–369f, 369n24, 370n25, 370t, 371f, 372nn26–28, 372t, 373t, 374f

      • DtD and, 366–70, 368f–369f, 369n24, 370t

      • hypothetical, 373t, 373–80, 374f, 374t, 375n30, 375t, 376n31, 377b, 377nn32–33, 378f: 378n34, 379f

      • indicators of, 366–67, 366n19

      • PoD and, 366

      • premium, 366–67

      • regression analysis of, 370–74, 370n25, 372nn26–28, 372t, 373t, 374f

      • reserve management and, 378–81, 379f, 380nn35–36,381n37

    • Sovereign default, 103–6, 361b

    • Sovereign risk

      • approach, 359–64, 361b, 361n4, 362nn5–9, 363f

      • banks and, 334

      • with CCA, 359–61, 360n1

      • concept, 362, 362nn5–7, 363f

      • corporate to, 361b

      • government guarantees/support of, 334–35

      • measurement of, 334

      • method summary on, 359

      • PD and, 384, 384nn40–41

    • Sovereign Wealth Funds (SWF), 250

    • Spain, 576t

      • banks of, 230, 274, 284, 286

      • Chile and, 250

      • exposures of, 487n6

    • Spearman’s rank correlation, 367n23

    • Special Liquidity Scheme, 342n3

    • Spillover risk, 281

      • copula-based, 279

      • Diebold-Yilmaz, 279

      • within EU, 308–9, 308t, 309n26

      • frequency of, 309

      • of global banking system, 305–8, 306t–307t, 308n22, 308t

    • SRISK, 412t

    • Stafford, Erik, 130

    • Stand-alone subsidiarization

      • pros and cons of, 153–54, 155, 155t

      • scenarios, 160t, 161

    • Standard and Chartered, 528

    • Standard Chartered Bank, 423n30

    • Standardized Approach, 60

    • Standard & Poor’s (S&P), 128

    • Starica, Catalin, 301

    • State-price density, 416, 434

    • Stock

      • market indices, 325t

      • markets, 247, 314t

      • NPLs and, 160n15

    • Stolz, Stephanie, 476

    • Straetmans, Stefan, 301

    • Stress Tester 3.0

      • approaches to, 21–22, 40–42

      • assumption with, 24n7

      • file overview and process of, 18–24, 19b, 19f

      • 20t, 21n2, 23nn5–6, 24nn7–8

      • guide to, 18–21, 19f, 20t, 21n2

      • results of, 22–23, 22nn5–6

    • Stress tests

      • actual data and, 18

      • approaches, models and methods of, 1–5, 2f, 3t, 5f

      • assumptions in, 18, 41

      • Brazilian banking sector and, 463–70, 465n15, 467f, 468f, 469f, 469t, 470t, 471t

      • on CAR, 37, 37f

      • challenges, 15

      • CIMDO and procedure for, 496–97

      • concepts of, 92

      • contingency planning and, 87

      • CoPoD and procedure for, 496–97

      • for DB, 190–99, 191t–192t, 193f–194f, 195nn18–19, 195t, 196nn20–21, 196t, 197n30, 197t, 198f, 198t

      • design consistent scenarios, 37–38, 37f, 38f,38n32

      • factor models and, 42

      • file overview and process of, 18–24, 19b, 19f, 20t, 21n2, 23nn5–6, 24nn7–8, 41–42

      • global financial crisis and, 1

      • at IMF, 1–9, 2f, 3t, 5f, 6t, 7t, 8f

      • method summary on, 17

      • metric of, 61, 61n5

      • modeling feedback effects of, 39–40

      • NPLs and design of, 478–79, 478f

      • NPLs and outcome of, 479–81, 480nn13–14, 480t, 481t

      • PDs and, 39, 40f, 41f

      • proposed, 125t

      • scenarios, 36–40, 37f, 38f 38n32, 39b, 40f, 41f

      • SRL model framework and, 441b

      • strengths and weaknesses of, 17–18

      • variables in, 22–23, 22nn5–6

      • See also specific approaches

    • Strike price, 416n15

    • Stulz, Rene M., 291, 301

    • Suda, Yuko, 243

    • Summer, Martin, 34n26, 231

    • Sunirand, Pojanart, 515

    • Superintendencia de Bancos e Instituciones Financieras, 237, 253

    • Supervisory Capital Assessment Program, 60, 60n1, 449–51, 531–32, 534f

    • Sweden, 155, 576t

    • Swinburne, Mark, 476

    • Swiston, A ndrew, 559

    • Switzerland, 567, 576t

    • Systemic CCA

      • application of, 419f, 422–28, 423nn29–32, 424f, 425f, 426f 426n33, 427t

      • estimation and specification of, 414–18, 415t, 416nn12–16, 417nn17–20, 418n21

      • expected loss from, 414–18, 415t, 416nn12–16, 417nn17–20, 418n21

      • extensions of, 418–22, 419f, 420f 421nn23–25, 422nn26–28

      • framework, 409–13, 410n1, 410n3, 411nn4–5, 411t, 412t, 413n6

      • measurement of, 335

      • methodology of, 413–18, 413n8, 414n9, 415t, 416nn12–16, 417nn17–20, 418n21

      • method summary on, 409

      • ML and, 417, 417n18

      • model, 412t

    • Systemic Expected Shortfall

      • MES and, 411n4

      • model, 412t

    • Systemic risk

      • within banks, 111–12, 111n30, 116–21, 117nn35–36, 118t, 119t, 120t

      • liquidity, 123–32, 124nn1–2, 125t, 126nn3–4, 1277, 128n5, 128n9, 129nn11–12, 130 nn13–16, 130t, 131f, 131t, 132t

      • in MPS, 410–11, 410n1, 411n4

      • solvency, 123–32, 124nn1–2, 125t, 126nn3–4, 1277, 128n5, 128n9, 129nn11–12, 130 nn13–16, 130t, 131f, 131t, 132t

    • Systemic Risk-Adjusted Liquidity (SRL)

      • application of, 440–45, 440n22, 441nn23–24, 442f, 442n58, 442t, 443f, 444t

      • approach, 440

      • characterization of, 432–33, 432n1, 432n3, 433n4

      • methodology, 433–40, 433n5, 434nn6–11, 435f, 436f 436n12, 437nn13–16, 438f, 438n17, 439nn18–21, 441b

      • method summary on, 431

      • model, 431–33, 432n1, 432n3, 433n5

      • model framework and stress tests, 441b

    • Systemic Risk Monitor (SRM), 60

    • System or portfolio DD (DD-system), 563

    • Tajvidi, Nader, 417, 438

    • Tarashev, Nikola, 239, 240, 264, 264n3, 267–68

    • Tawn, Jonathan, 301

    • Termination rate shocks, 198

    • Through-the-cycle, 64, 64n18

    • Tieman, Alexander, 282, 286b, 566n2

    • Too-big-to-fail, 230

    • Too-connected-to-fail (TCTF)

      • analysis of Chilean banking system and, 237–39, 238t, 239t, 240f, 241t

      • assessment of, 230, 274–75, 274n17, 274n19

      • balance sheet-based network analysis and, 230–33, 231f, 231n2, 231nn4–5, 232f, 233f

      • banking systems, 234, 237t

      • calculations, 268–72, 268n7, 269f, 269nn8–9, 270f, 271nn12–15

      • capital charge and, 263, 264n3, 265–68, 266f, 268n6

      • characterization of, 230

      • example of, 272–74, 272n16, 272t, 273t

      • incremental portfolio approach and, 265–67, 266f

      • other approaches and, 267–68, 268n6

      • regulatory capital and, 263

      • risk, 229–30

      • societal losses and, 265

      • summary method on, 229, 263

      • two-bank example and, 265

    • Too-many-to-fail, 230

    • Top-down (TD)

      • approach to macroeconomic model, 19f,21–22, 46n2

      • liquidity stress tests, 94, 95t

    • Troubled Asset Relief Program (TARP), 534, 543

    • Tsatsaronis, Kostas, 239, 240, 264, 264n3, 267–68

    • Tsomocos, Dimitrios P., 515

    • Turkey, 152n4, 155, 156t, 167t–169t, 171

    • UBS, 525, 527

    • Udell, Gregory, 152–53

    • Ukraine, 155, 156t, 158n12, 159t, 167t–169t, 171

    • Ultimate risk basis (URB)

      • data, 213–14, 213n10, 214f, 227, 227t–228t

      • for foreign claims, 213n10

    • Unemployment, 500–501

    • Unexpected loss (UL)

      • of portfolio credit risk, 486

      • term, 486n1

    • Unicredito, 528

    • United Kingdom (U.K.), 196n21, 357–58, 576t

      • banking sector and EL, 422–27, 423nn29–32, 424f, 425f, 426f, 427t

      • banking systems in, 234, 240

      • banks of, 286 b

      • CCA and, 333–34, 337–38, 350f, 353–56, 355b, 356f, 357f

      • Chilean banking system and, 250

      • Contagion risk of, 283–84

      • corporate and financial linkages within, 349–56, 350f, 350n10, 351f, 352f, 353f 354f, 355b, 356f

      • debt at risk and, 337–38, 344

      • during global financial crisis, 338–40, 338f, 339f, 340f, 341f

      • household and financial linkages within, 328–49, 338f, 339f, 340f, 341f, 342f 342n3, 343f, 343nn4–5, 344nn7–8, 344t, 345f–346f, 347n9, 347t, 348f, 349f 350f

      • ICR and, 350–54, 353f

      • interest rate shock and, 347, 348f

      • Ireland and, 283

      • LGD of, 344–46, 346n9, 347t

      • unsecured debt of, 349, 350f

    • United States (U.S.), 195n18, 196n21

      • banking sector, 440–45, 441b, 441nn23–24, 442f, 442n25, 442t, 443f, 444n55, 444t

      • banking systems in, 234, 240, 254f, 263

      • banks, 230, 286b

      • business week principle utilized by, 93

      • Contagion risk of, 283–84

      • debt, 555n20

      • financial environment, 128, 128n5, 132

      • financial institutions in, 257t, 258t, 272n16, 272t

      • GDP of, 457n9

      • Ireland and, 283

      • liquidity stress tests and banking system of, 128, 128n5, 132

    • Upper, Christian, 231

    • U.S. dollar, 456

      • Costs, 93, 93n7, 189n15

      • measurement in, 364n10

    • Value-at-risk (VaR)

      • Brazilian credit, 466–70, 470t, 471t

      • components of, 94, 437

      • credit, 135, 146–47, 146f, 147f

      • as incoherent, 439n20

      • levels, 112

      • measures, 377n33

      • models, 42, 377n32

    • ValueCalc Banking System Risk Modeling

      • Software, 104, 104n3, 124n1

    • ValueCalc Global Portfolio and Credit Risk, 104, 104n3

    • van Deventer, Donald, 404, 407

    • van Lelyveld, Iman, 152

    • Variables

      • CoPoD and explanatory, 490–93, 493n23, 494t

      • GDP, 20

      • macroeconomic, 395–404, 395f, 395nn5–6, 396t, 397n7, 397t, 398f, 401f, 402f 403f, NPLs and dependent, 476, 476nn2–4

      • NPLs and independent, 476–77

      • in stress tests, 22–23, 22nn5–6

    • Vasicek, Oldrich, 271n14

    • Vasicek model, 107–8, 108n13

    • Vassalou, Maria, 286b, 563b

    • Vector autoregression (VAR)

      • CCA and, 388, 399–400

      • specifications, 456

    • Vector error correction model regression, 577, 578t

    • Vesala, Jukka, 248, 279, 282–83, 286b, 291, 300–301

    • Virolainen, Kimmo, 28b

    • Volatility

      • of ASF, 441b

      • of RSF, 441b

      • to shock, 441b

      • sovereign balance sheet and, 365–66, 366n18

      • See also Chicago Board Options Exchange Market Volatility Index (VIX)

    • von Peter, Götz, 213

    • Vulpes, Guiseppe, 248

    • Wachovia, 104, 523

    • Washington Mutual (WaMu), 104, 523, 527

    • Watson, Geoffrey S., 541

    • Watts, Duncan, 243

    • Wells, Simon, 231, 237, 243

    • Wells Fargo, 272n16

    • White, Alan, 107–8, 108n13

    • Wilson, Thomas, 454

    • Wong, Eric, 101, 130n13

    • World Bank, 63, 160, 570

    • World Economic Outlook, 158, 535, 557

    • Worldscope, 350n10

    • Worms, Andreas, 231

    • Wu, Liuren, 422

    • Xing, Yuhang, 286b, 563b

    • Yao, James Y., 301

    • Zhou, Hao, 410

    • Zhu, Haibin, 410

    • Z-scores, 23, 23nn5–6, 247

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