Accounting-based approach

, 19–21, 24

Accrued items

, 107

Acid-test ratio

, 107

Advanced Stress Testing Techniques

, 26

Aggregate index

, 106

Amount

, 30, 33, 36–37, 59, 93

capital requirement

, 17

higher loss

, 5

lower available

, 18

minimum capital

, 17

total

, 93

Amount of loss in value

, 7–8

Analysis

econometric

, 21

proper

, 21

quantitative

, 77

refined

, 20

sensitivity

, 36, 43, 107

technical

, 15, 32

Analytic (variance-covariance) approach

, 9

Analytical tool

, 15

Annualised Standard Deviation

, 8

Appellation

, 79

Applications

, 9–10, 17, 24, 28, 33, 44, 79, 95

new

, 77

real-world

, 9

Approach

Economic Valuation

, 15

balance sheet

, 19, 22

best

, 18

decentralised

, 41

dynamic

, 116

engineering

, 42

excel-based

, 22

historical

, 5, 9–11

indicator-based

, 19

internal-based

, 29

internal ratings-based

, 31–32

macroeconomic modelling

, 21

macro-financial

, 20–21, 26

macro-financial-based

, 19

market-based

, 21

network

, 22

network analysis

, 19

non-parametric

, 5

proactive

, 85

regulatory

, 49

static

, 17

testing

, 43

three-tiered

, 19

top-down

, 32, 39, 41, 47, 51–52, 60

Assessment

, 37, 39, 43, 58, 86

forward-looking

, 44

heteroscedasticity

, 71

loan affordability

, 103

market-geared

, 25

prospective

, 27

repayment capacity

, 103

sound

, 42, 46

testing

, 42

Asset pricing model

, 53

Asset quality

, 55, 60, 94–95, 104, 111

Asset sales

, 49

Asset-backed securities

, 53, 69

Assets ratio

, 104, 107

Assets

, 2, 8, 17, 20, 26–27, 35–36, 42–45, 56–57, 92, 94, 96, 98, 100, 102–106, 111–112

average net

, 108

banking system’s

, 30, 56

credit institution counterpart/total

, 111

current

, 105, 107

distinct income-earning

, 94

fixed

, 98, 105

foreign

, 92

generating

, 55

key

, 116

loan losses/total

, 98

local

, 88, 92

local banks/total

, 112

respective

, 10

riskier

, 8

safe

, 55, 81

selling

, 29

short-term

, 110

tax-deferred

, 60

total consolidated

, 20, 59

total financial sector

, 54

total financial system

, 96

unweighted

, 31, 59, 63

Automated data processes

, 117

See also Solid data analytical system

Balance sheet approach

, 19, 22

Balance sheet items

, 26, 102

Balance Sheet Stress Testing

, 3

Balance sheet

, 21–27, 35–36, 39, 44, 47, 54, 55, 58, 62, 70, 83, 94, 102–103, 106

Bank assets

, 12

Bank capital ratios

, 27

Bank capital reforms

, 30

Bank capital requirements

, 29

Bank Lending Surveys

, 103

Bank of Albania

, 79

See also Financial Stability Risk Map

Bank-based financial system

, 86

Bank-by-bank estimates

, 15

Banking crises

, 12, 27

Banking risk map

, 79

Banking sector

, 1, 16–18, 21, 26–27, 29, 49–50, 55–57, 61, 78–79, 86, 91–95, 97–98, 105, 110

Banking Supervision

, 2

Banking system

, 30, 34, 39, 41, 46, 50, 53, 54–59, 62–63, 68, 93, 95, 97–98, 111, 116

Banks mortgage lending

, 54

Banks

, 1–17, 20, 22–23, 26–30, 32–41, 44–45

central

, 22, 33, 37, 39, 85

euro-area

, 66, 97

foreign

, 54–55, 70, 93

foreign-owned

, 56, 58

government-owned

, 58

healthy

, 59

important

, 22, 41, 47

large

, 48, 59, 70, 93

largest

, 31, 54

major

, 53, 98

small

, 57, 59, 93

systemic

, 19, 22

undercapitalised

, 29, 60

weak

, 59, 62

Basel Committee on Banking Supervision

, 2, 26

Bessel function

, 4

Bibliography

, 14

Bond issuance

, 16, 106

Bonds instruments

, 105

Bonds

, 2, 22

corporate

, 106

government

, 106

mortgage

, 106

unsecured

, 97

Breusch–Godfrey LM test

, 71

Canadian economy

, 85

See also Financial stress indicator

Capital adequacy ratio (CAR)

, 15, 17, 104

Capital adequacy

, 15, 17, 26, 57, 94–95, 104, 111

Capital injections

, 57–58, 65, 69

Capital metric

, 49–50, 60, 62

Capital over risk-weighted assets

, 29

Capital Ratio

, 18, 24, 29–35, 46, 48, 56, 59–63, 67, 69–70, 98–99, 103

Capital shortfall

, 24, 29–30, 35–36, 60

Cash and cash equivalents

, 77–79

Cash flow interest cover

, 107

Central Eastern and South Eastern Europe (CESEE)

, 51

Chernoff Faces

, 73, 77–79

Cluster analysis

, 22

Committee on the Global Financial System, The

, 48

Commonwealth of Independent States (CIS)

, 51

Comprehensive Capital Analysis and Review (CCAR)

, 19–20

Computation of risk

, 31

Contagion risk

, 41, 47, 53, 57, 73, 76–77

Contingent Claims Analysis (CCA) approach

, 19

Contingent Claims Analysis

, 19, 25

Continuous random variable

, 3

Corporate debt

, 56, 106–107

Corporate Sector Metrics

, 106

Corporate sector

, 17, 53, 56, 91, 95, 106–107

Correlation coefficient

, 8

Country Stress Index

, 92

Country-specific features

, 15, 50

CoVaR

, 24, 28

CPI inflation

, 92

Credit cycle

, 35

Credit default swap (CDS)

, 31, 93

Credit Gap

, 93

Credit intermediation

, 111–112

Credit risk

, 17, 21, 23, 26–27, 35, 47–48, 51, 54, 56–57, 73, 95–97

Crisis management

, 15, 37–38, 45, 61, 66, 67

Cross-border integration

, 22

Cross-border interbank loans

, 56

Cumulative density function (CDF)

, 2–3

Current assets

, 105, 107

Current liabilities

, 107, 112

Current ratio

, 56, 107, 110

Cyberattacks

, 116

Data frequency

, 7, 9–10, 12

Data preprocessing

, 9

Data quality

, 16, 117

Data-generating process

, 2

Debt ratio

, 104, 107, 110

Debt Service Coverage Ratio

, 103–105, 107

Debt-to-equity ratio

, 107, 108

Deposits

, 47, 51–52, 55, 57, 77–78, 91–96, 98–99, 101–102

Distress dependence

, 25

Dodd-Frank Act Stress Tests (DFAST)

, 19–20

Dynamic Stochastic General Equilibrium

, 21

Earnings and profitability

, 94–95, 111

Econometric methodologies

, 88

Economic capital

, 19

Economic model

, 2, 21, 52

Economic performance

, 15, 85

Economic policy-making

, 18

Economic significance

, 15

Emergency liquidity operations

, 57

Emergency liquidity support

, 57

Empirical distribution

, 13

Equity capital value

, 34–35

Equity indicator-based approach

, 19

Equity indicator-based

, 25

Equity market risk

, 96

Euro-area banks

, 66, 97

European Banking Authority

, 16, 59, 98, 102

European Monetary Union

, 116

EU-wide Stress Test

, 33, 50, 58–60, 62–64, 67, 71

Exchange Market Pressure Index (EMPI)

, 87

Exchange rate depreciation

, 39

Exchange rate

, 3, 19, 21, 23, 26–27, 32, 35, 39, 51, 54–55, 57, 87–88, 92, 95, 110, 115

Expected Default Frequency (EDF)

, 23, 71

Expected Shortfall (ES)

, 2, 97

External balance metric

, 92

Extreme Value Theory (EVT) approach

, 19

Extreme Value Theory

, 19, 25

Feasible risks

, 115

Federal Reserve Bank

, 80

Federal Reserve

, 20, 32, 34, 61, 66, 80

Financial crisis

, 31–32, 45, 57, 86, 103

Financial data returns

, 7, 9

Financial institution

, 1, 16–21, 23, 25, 28, 30, 36–37, 39–42, 44, 47–49, 53, 55, 68, 104

Financial intermediation function

, 86

Financial intermediation sector

, 21, 56

Financial Intermediation Services Indirectly Measured

, 92

Financial Market Indicators

, 93

Financial Sector Assessment Program (FSAP)

, 16

Financial sector vulnerabilities

, 45

Financial Services Authority

, 15

Financial Soundness Indicators (FSIs)

, 45, 93–94, 111

Financial stability assessment

, 18, 27, 91

Financial stability departments

, 117

Financial stability reports

, 26, 38, 41, 44, 79

Financial Stability Risk Map (FSRM)

, 73, 79

Financial stress indicator

, 85–86

Financial System Stress Index (FSSI)

, 73, 81–82, 85–88

Financial system

, 15–16, 20–21, 27–29, 31, 34, 41–42, 44–45, 47

Financial variables

, 3, 71, 85, 88

Fintech and Cryptocurrency

, 115

Fiscal policy

, 68, 116

Fiscal union

, 68–69, 116

Fischer index

, 105

Fixed assets

, 98, 105

Foreign exchange market

, 86, 93

Foreign exchange risk

, 56, 95–96

Foreign exchange swap market

, 86

Foreign holdings

, 93

Funding risk

, 47

Funding/liquidity risk

, 73

GDP ratio

, 97, 109, 117

Gearing ratio

, 105

Generalised hyperbolic distribution (GHD)

, 2–3, 13

Global financial markets

, 81

Global Financial Stability Reports

, 26, 44

Global Integrated Monetary and Fiscal model

, 21

Government bond market

, 86

Government sector

, 91

Government securities

, 93

Graph theory

, 73

Great Recession

, 2, 16, 44, 85, 115–116

Gross operating surplus

, 107

GVAR model

, 71

Heat maps (HM)

, 73, 80–81

Herfindahl—Hirschman Index (HHI)

, 97, 112

Historical approach

, 5, 9–11

Historical simulation

, 7, 9

Household sector

, 21, 39, 55–56, 80, 91, 96, 104–105

Hyperbolic distribution (HYP)

, 2, 3, 13

Hyperbolic function

, 4

Illiquidity

, 2

Inflation

, 24, 26, 33, 39, 56, 83, 92, 105

Insurance sector

, 16, 42, 84, 91

Integrated financial systems

, 20

Integrated Stress Testing

, 36, 42

Interactive chart

, 82

Interbank market

, 16, 41, 47, 86, 93, 95

Interest Coverage ratio

, 56, 107

Interest rate risk

, 17, 42, 56, 57, 98, 104, 110

International Monetary Fund (IMF)

, 16

Intraday credit

, 112

Investment funds

, 91, 112

Investments

, 77–78, 92, 96, 106, 108–109

Kansas City Financial Stress Index (KCFSI)

, 85

Key Risk Indicators

, 98

Leverage

, 5, 23, 60–62, 66, 95, 107–108, 112

Leverage ratio

, 19, 30–32, 35, 49, 59–63, 67–68, 70

Liquidity risk

, 16–17, 21, 35, 47, 52, 56, 57–58, 73, 76

Liquidity transformation

, 110, 112

Loans

, 24, 54, 56, 77, 94–99, 108–111

Bank

, 64, 103, 106

Construction

, 109

Corporate

, 106, 108

Housing

, 24, 54, 109

Impaired

, 99, 103

Interbank

, 56, 77, 95

Mortgage

, 54, 105

Non-Performing

, 17, 94, 97, 104, 111

Total Gross

, 94, 111

Total

, 47, 56, 91, 94–99, 101, 103–104

Logit models

, 87

Long-term corporate debt

, 106

See also Corporate debt

Loss Given Default

, 23, 26, 51

Machine learning techniques

, 117

See also Solid data analytical system

Macro Financial Risk Assessment Framework (MFRAF)

, 50

Macroeconomic instability

, 54

Macroeconomic liquidity imbalances

, 115

Macroeconomic Metrics

, 92

Macroeconomic modelling approach

, 21

Macroeconomic risk

, 73–74

Macroeconomic variables

, 21, 26, 29, 71

Macro-financial approach

, 20–21, 26

Macro-financial-based approaches

, 19

Macro-prudential risk analysis

, 16

Macro-prudential Stress Testing

, 36, 47

Market data

, 23, 31

Market interpretation

, 29

Market price-based approach

, 19–20, 22–23, 25

Market risk

, 21, 25, 27, 32, 35, 37, 47–48, 51, 57, 73, 74, 96, 104, 112

Maturity transformation

, 91, 110, 112

Metrics for Investment Funds

, 112

Metrics of Assessments

, 91

Micro-prudential

, 30, 36–38

Monetary policy

, 57, 87

Money market

, 87

Money Multiplier

, 92

Monte Carlo approach

, 2, 5, 9–12

Monte Carlo simulation

, 7, 9, 36

Mortgage loan

, 54, 105

Mundell—Fleming model

, 116

Net fees and commissions

, 77–79

Net interest income

, 29, 53, 77–78, 94, 97, 101, 104

Net international investment position

, 92

Net Open Foreign Exchange

, 56, 98, 112

Net Operating Income

, 97–98

Net profits

, 77–79

Net Trading Income

, 98

Network analysis approach

, 19

Network analysis

, 19–22, 24–25, 41

Network interactions

, 22

Network theory

, 73, 77

Non-additive principle

, 2

Non-bank Financial Sector

, 31, 110, 117

Non-bank sectors

, 91

Non-banking financial sector

, 91

Non-linearity

, 2

Non-performing loans (NPLs)

, 17, 94, 97, 104, 111

Normal distribution

, 3, 5–7, 9, 12–13

Normal inverse Gaussian (NIG)

, 3

NPL ratio

, 21, 23

OFR Financial Stress Index (OFR FSI)

, 73, 81

See also Interactive chart

One-tailed test

, 5

Operating profit

, 107

Overnight reserves

, 112

Parametric computations

, 10

Parametric modelling

, 7, 9

Parametric VaR

, 7, 9

Payment and Settlement System Metric

, 112

Political Economy

, 31, 115

Portfolio Application

, 9

Portfolio investment value

, 10

Portfolio managers

, 2

Portfolio-based models

, 87

Primary input data

, 23

Principal payments

, 95–96

Probability density function (PDF)

, 2–3

Public Debt Metrics

, 109

Qualitative stress testing

, 20, 36, 43

Quantitative analysis

, 77

Quantitative stress testing

, 20

Radar Chart

, 80

See also Federal Reserve Bank

RAM. See Risk Assessment Matrix

Random variable

, 3–4, 8–9

Ratio of capital investment

, 91

Ratio of credit

, 91

Real economy

, 27, 62, 88

Real Estate Sector Metrics

, 109

Real estate sector

, 91, 96, 109, 115

Real GDP growth

, 33, 39, 51

Realistic risk management metric

, 7, 9

Real-world applications of VaR

, 9

Refined analysis

, 20

Regulatory capital framework

, 16

Regulatory capital

, 16–17, 19, 32, 35, 51, 54, 56, 94

Reinsurance and actuarial issues

, 111

Remedial actions

, 30, 34, 46, 59

Return on Equity, (ROE)

, 94–97, 100, 104, 112

‘Reverse stress tests’

, 32

Risk Assessment Matrix (RAM)

, 73, 81, 83

Risk management metrics

, 1, 44

Risk management tool

, 2, 17, 26, 42

Risk models

, 47–48, 52, 84

Risk parameters

, 26, 48

Risk Weighted Assets

, 17, 29, 35–36, 50, 67, 94, 97, 103–104

Risk-adjusted capital ratio

, 31

Risks classification

, 73

ROA. See Return on Assets

Ruble fluctuations

, 56

Russian financial system

, 56–58

Russian foreign-owned banks

, 56

Russian government

, 58

Salaries

, 77–79

Satellite model

, 21, 53, 71

Scuzzarella, Ryan

, 22

Secondary input data

, 23

Shadow banking sector

, 91

Shadow Banking System

, 110

Short-term corporate debt

, 106

See also Corporate debt

Short-term interest rate

, 87

Significance level

, 1, 5–8, 10, 12

Simulated data

, 10

Solid data analytical system

, 117

Solvency and liquidity

, 16, 35

Solvency ratio

, 105

Solvency

, 16, 22–23, 34–35, 37, 73, 75, 99, 105

Solvency/leverage risk

, 73

Sound Stress Testing

, 27, 29–30, 42, 49

Sovereign risk

, 27, 47, 93, 109

Special Purpose Vehicles (SPVs)

, 54

St. Louis Fed Financial Stress Index (STLFSI)

, 85

Standard deviation

, 5–10, 28, 35, 103

Standard metric of risk assessment

, 16

Standardised data series

, 88

State of affairs

, 15, 31, 41, 44, 64

Statistical distribution type

, 10

Stock exchange

, 3, 9

Stress testing

, 15

Synergies effect

, 36

Systemic risk identification

, 73

Total assets

, 41, 49, 51, 54–57, 62, 67–68, 70

Banking system

, 41, 54, 57

Financial system

, 57

Total equity

, 79–80, 98, 100, 102–103

Total liabilities

, 93, 96–97, 102, 105, 111–112

Turnover ratio

, 96, 112

Two-assets Portfolio

, 8

UK financial system

, 53

Value at risk (VaR)

, 1, 17, 28, 97

Variance-covariance

, 2, 5

approach

, 5, 9

method

, 10

Visual analysis

, 77

Visual assessments

, 73

World Bank

, 16, 26, 93–94, 96