Banking Stress Testing

The chapter is dedicated to stress testing the banking sector liquidity. The purpose of the study is to develop and justify a stress test pattern for evaluating the banking sector exposure to liquidity risk, as an alternative to the methods used by Basel Committee on Banking Supervision (Basel III). The chapter defines the main sources of the liquidity loss risk while justifying the importance of adequately assessing the credit risk as the main risk factor, to evaluate the liquidity loss for the Russian banking sector. The results evidence material influence of corporate portfolio credit risk on banks liquidity. The stress test results show the relevancy of the regulator and the bank management closely monitoring the credit portfolio quality management of the Russian banking sector.