Comparison worldwide and Ukrainian practice of bank stress testing

• Main Authors: Andrii Ramskyi, Olena Sobolieva-Tereshchenko, Valeriia Zharnikova
• Format: Article
• Language: English
• Published: Zaporizhzhia National University 2020-01-01
• Series: Менеджмент та підприємництво: тренди розвитку
• Subjects: financial stability; basel iii; core capital; regulatory capital
• Online Access: https://management-journal.org.ua/index.php/journal/article/view/134

Early stress tests, used primarily as risk management tools, date back as far as the 1990s. Programs conducted by the IMF, Bank of England, Dodd-Frank Act, Bank of Japan, Swiss Financial Market Supervisory Authority and the World Bank promoted the used of stress tests. The basic idea the introduction of stress testing was to ensure that banks have sufficient capital to cover their risks, and to ensure that banks and banking systems are more resilient to economic and financial shocks. This paper provides an overview of the recent implementation of stress testing by regulatory agencies in the United States, the United Kingdom, Japan, Switzerland and the European Union. This article also gives an overview of the stress testing methodology developed by the National Bank of Ukraine and in accordance with Basel III recommendations. The aim of research is comparative evaluation of key aspects of system-wide stress tests in different finance systems: Euro area, United Kingdom, Switzerland, Japan, the United States and Ukraine, identifying identification of similarities and differences and prospects for the development in our country. To substantiate the theoretical positions and reasoning of the conclusions general scientific methods are used, including system, abstract-logical approach, as well as methods of formalization, analysis and synthesis of information, comparative analysis. During the study, a comparative analysis of the stress-testing methodology in six countries was conducted. The scientific importance of the work lies in the fact that on the basis of the conducted research it is possible to improve stress-testing of Ukrainian banking system based on best practices from developed countries. The value of the research is that it is increasingly necessary to used best practices of stress tests as a powerful tool in risk management, in micro prudential and macroprudential policies. Results of researches can to used not only in development methodology of stress-testing, but also in case-study of banking.