Work detail

Macro Stress Testing on Credit Risk of banking sectors in PIIGS countries

Author: Mgr. Igor Vukić
Year: 2014 - summer
Work type: Masters
Language: English
Pages: 74
Awards and prizes:
Abstract: In this paper we stress test the banking sectors of the PIIGS countries. We focus
in particular on modeling the credit risk and estimating the impact of changes
in macroeconomic variables on the level of capital adequacy. We develop two
scenarios - a baseline stress testing scenario and an adverse scenario. The results
indicate that under both scenarios, the analyzed banking systems have some
capital adequacy issues. We find that the Portuguese banking sector is facing
biggest capitalization problems. Number of undercapitalized banks under the
adverse scenario is bigger than in baseline scenario for all the countries. Another
finding which is common for all the countries is that large-sized privately owned
banks are better capitalized than small and medium-sized ones. Last finding
concerns ownership structure where we have found that all the state-owned
banks are undercapitalized in both scenarios.




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