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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