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. |
