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Stress testing and contingency funding plans: An analysis of current practices in the Luxembourg banking sector

Numéro42
DateDecember 2009
AuteurFranco Stragiotti
RésuméThis paper analyzes the current practices adopted by a sample of Luxembourg banks on liquidity stress testing and contingency funding plans. The paper covers four main topics: liquidity stress testing coverage, scenario design, policy issues and contingency funding plans. We compare, when relevant, these results to a larger sample of EU peer banks. The results, collected through a questionnaire addressed to forty-seven banking groups, are analyzed by the means of the principal component technique. The paper also highlights the main features and shortcomings of local banks in this field.

Keywords: liquidity risk, liquidity stress testing, contingency funding plan, principal component analysis.

JEL Classification: G21

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