Work detail

Stress Testing of the Banking Sector

Author: Bc. Aneta Mohylová
Year: 2014 - summer
Leaders: PhDr. Jakub Seidler Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 78
Awards and prizes: B.A. with distinction from the Dean of the Faculty of Social Sciences for an extraordinarily good bachelors diploma thesis.
Link: https://is.cuni.cz/webapps/zzp/detail/137350/
Abstract: This bachelor thesis deals with stress testing of the banking sector as a tool that assesses the resilience of
a portfolio, an institution itself or an entire system to adverse macroeconomic development. It aims to
provide the reader with general understanding of theoretical aspects of stress testing and its practical
application. In the theoretical part, the meaning, purpose and use of stress testing is discussed. Further,
stress testing methodology and its limitations are explained and different types of stress tests are
mentioned. In the practical part, two hypotheses are tested using vector autoregression model. Firstly,
the dependence between loan portfolio quality and selected macroeconomic variables is estimated.
Secondly, two types of stress tests are designed in order to test the resilience of the Czech banking sector
and individual groups of banks divided according to their size categorization to three adverse scenarios
via the most common macroeconomic indicator – capital adequacy ratio. Results suggest high resilience
of the Czech banking sector towards adverse macroeconomic development.

Partners

ČSOB
Deloitte
McKinsey & Company

Sponsors

CRIF
EY