Prague Economic Papers 2020, 29(3):251-273 | DOI: 10.18267/j.pep.732

A Liquidity Risk Stress-Testing Framework with Basel Liquidity Standards

Hana Hejlováa,b, Zlatuše Komárkováa,c, Marek Rusnáka
a Czech National Bank, Prague, Czech Republic
b Charles University, Institute of Economic Studies, Faculty of Social Sciences, Prague, Czech Republic
c University of Finance and Administration, Prague, Czech Republic

We present a macro stress-testing model for banks' market and funding liquidity risks with a survival period of one year. The model follows the main principles of the Basel standards LCR and NSFR. Besides, the model takes into account the impact of both bank-specific and market-wide scenarios and includes second- round effects of shocks due to banks' feedback reactions. The presented methodology is then applied to a sample of Czech banks. This allows us to monitor the sensitivity of their liquidity position to the combination of shocks under consideration.

Keywords: banking, financial stability, liquidity, stress testing
JEL classification: G12, G19, G21

Received: December 28, 2017; Accepted: June 7, 2019; Prepublished online: March 13, 2020; Published: June 16, 2020  Show citation

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Hejlová, H., Komárková, Z., & Rusnák, M. (2020). A Liquidity Risk Stress-Testing Framework with Basel Liquidity Standards. Prague Economic Papers, 29(3), 251-273. doi: 10.18267/j.pep.732
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