Stress-testing as a method of macroprudential policy and information security in banking sector

Olena Berezina,Valentina Kunchenko-Kharchenko,Lesya Berezhna,Iryna Honcharenko,S Semerikov,V Soloviev,L Kibalnyk,H Danylchuk,O Chernyak

doi:10.1051/shsconf/20196506004

Olena Berezina, Valentina Kunchenko-Kharchenko + Show 7 more

Open Access

https://doi.org/10.1051/shsconf/20196506004

Copy DOI

Abstract

The article contains an overview of the essence, history, components, scenarios, methodology and results of stress testing of the Ukrainian banking system. The purpose of this paper is to explore and analyze existing approaches to stress testing as a method of macro-prudential policy of the Central Bank, to determine the results of quantitative risk assessment and financial stability of banks and their readiness to have sufficient capital to cover losses in various macroeconomic scenarios, as well as to develop a model of integrated assessment and rating of banks based on the results of stress testing. In order to summarize the results of the study, a model of integrated assessment was developed and a rating of banks was built based on the analysis of their financial stability, capital adequacy and readiness to withstand the crisis. To solve the problem of qualitative analysis of the stress-testing results in terms of a significant number of indicators and calculations a simulation of the integral indicator is proposed which helps information users group the data, obtain a generalized assessment and form a rating of banks according to the financial stability reserve.

Highlights

Ensuring the financial stability of the State banking sector every year is becoming increasingly active stipulated by the rapid pace of globalization
Macro-prudential policies cannot completely eliminate systemic risks, but can prevent their excessive accumulation and reduce the likelihood of their implementation. It increases the stability of the economy, reduces the volatility of GDP confirmed by the results of empirical studies
In the Guidelines on the procedure for stress testing in banks of Ukraine (2009) and Guidelines for the organization and functioning of risk management systems in banks of Ukraine (2004) stress testing is defined as a method of quantitative risk assessment which is to determine the value of the inconsistent position exposing a bank to a risk, and to determine the shock value of changes in the external factor that is the exchange rate, interest rate and the like

Summary

Introduction

Ensuring the financial stability of the State banking sector every year is becoming increasingly active stipulated by the rapid pace of globalization. There is a reduction in obstacles to additional cash flows from abroad and an increase in information flows, financial innovation and other technological advances Such processes contribute to the formation of close links between the financial markets of different countries and regions. Central banks of the countries should be prepared for shocks that may occur both outside and within the country and will be transmitted through channels of interconnection to the core of the national economy and are likely to damage financial stability. This raises the question how it is possible to prevent potential banking sector shocks and the country as a whole at an early stage. Macroeconomic stress testing is a key method to ensure an effective financial stability

Objectives

Results

Conclusion