Stress Tests and Liquidity Crisis in the Banking System
DOI:
https://doi.org/10.12775/EQUIL.2013.012Keywords:
stress tests, liquidity, banking bailoutsAbstract
The paper´s aim is to contribute to the debate on the impact of stress test on banking system liquidity. Due to the theoretical character of the problem, the used methodology is a set of results from research and theoretical works about how the attempts to increase system solvency could lead into a greater lack of liquidity.
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References
Abbink J.B. (2011), Constructing stress tests, ?Journal of Risk Finance?, Vol. 12, Issue 5. DOI: http://dx.doi.org/10.1108/15265941111176154
Acharya V., Yorulmazer T. (2007), Too Many to Fail ? An Analysis of Time- Inconsistency in Bank Closure Policies, ?Journal of Financial Intermediation?, Vol. 16, Issue 1. DOI: http://dx.doi.org/10.1016/j.jfi.2006.06.001
Aikman D., Alessandri P., Eklund B., Gai P., Kapadia S., Martin E., Mora N., Sterne G., Willison M. (2009), Funding liquidity risk in a quantitative model of systemic stability, June, Bank of England, Working Paper, No. 372. DOI: http://dx.doi.org/10.2139/ssrn.1344287
BBC (2011), German bank Helaba to pull out of stress tests, 13 July, BBC News Business.
BCBS, Basel Committee on Banking Supervision (2009), Principles for sound stress testing practices and supervision, May, Bank for International Settlements.
Blum J. (1999), Do bank capital adequacy requirements reduce risks in banking?, ?Journal of Banking and Finance?, Vol. 23. DOI: http://dx.doi.org/10.1016/S0378-4266(98)00113-7
Brunetti C., Di Filippo M., Harris J.H. (2011), Effects of Central Bank Intervention on the Interbank Market during the Subprime Crisis, ?Review of Financial Studies?, Vol. 24, Issue 6. DOI: http://dx.doi.org/10.1093/rfs/hhq123
Burke M. (2011), The support given to EU banks is killing the recovery, 17 July, The Guardian.
Caballero R.J., Krishnamurthy A. (2008), Collective Risk Management in a Flight to Quality Episode, ?Journal of Finance?, Vol. LXIII, No. 5. DOI: http://dx.doi.org/10.1111/j.1540-6261.2008.01394.x
Cardinali A., Nordmark J. (2011), How informative are Bank Stress Tests?: Bank Opacity in the European Union, Master Thesis in Finance, Lund University.
Chortareas G., Girardone C., Ventouri A. (2012) Bank supervision, regulation, and efficiency: Evidence from the European Union, ?Journal of Financial Stability?, Vol. 8, Issue 4. DOI: http://dx.doi.org/10.1016/j.jfs.2011.12.001
Das S. (2011), The EBA Stress Tests ? Not the Real Thing, 26 July, Eurointelligence,
Dash E. (2009), If Its Too Big to Fail, Is It Too Big to Exist?, ?New York Times?, Week in Review, 20 June,
Ellsberg D. (1961), Risk, Ambiguity, and the Savage Axioms, ?Quarterly Journal of Economics?, Vol. 75, No. 4. DOI: http://dx.doi.org/10.2307/1884324
Elul R. (2008), Liquidity Crises, ?Business Review?, Q2.
European Banking Authority (EBA) (2011), Eu-Wide Stress Test Aggregate Report, 15 July.
Financial Stability Board (2011), Policy Measures to Address Systemically Important Financial Institutions, 04 November.
Finch G., Martinuzzi E., Penty C. (2011), EU Bank Stress Tests Missing Sovereign Defaults Fail to Convince Analysts, 18 July, Bloomberg.
Freixas X. (1999), Optimal bailout policy, conditionality and constructive ambiguity, 15 December, Financial Market Group Discussion Paper 237, London School of Economics.
Goodhart C., Huang H. (2000), A Simple Model of an International Lender of Last Resort, ?Economic Notes?, Vol. 29, Issue 1. DOI: http://dx.doi.org/10.1111/1468-0300.00022
Gorton, G. and Winton, A. (1995). Bank capital regulation in general equilibrium. Wharton Financial Institutions Centre, Working Paper.
Holmstrom B., Tirole J. (1998), Private and Public Supply of Liquidity, ?Journal of Political Economy?, Vol. 106, No 1. DOI: http://dx.doi.org/10.1086/250001
Hovakimian A., Kane E.J. (2000), Effectiveness of capital regulation at U.S. commercial banks, 1985 to 1994. ? Journal of Finance? Vol. 55. DOI: http://dx.doi.org/10.1111/0022-1082.00212
Micossi S. (2012), Unholy compromise in the eurozone and how to right it, July, CEPS, No. 277.
Moulton H.G. (1918a), Commercial Banking and Capital Formation: I, ?Journal of Political Economy?, Vol. 26, No. 5. DOI: http://dx.doi.org/10.1086/253104
Moulton H.G. (1918b), Commercial Banking and Capital Formation: II, ?Journal of Political Economy?, Vol. 26, No. 6. DOI: http://dx.doi.org/10.1086/253113
Moulton H.G. (1918c), Commercial Banking and Capital Formation: III, ?Journal of Political Economy?, Vol. 26, No. 7. DOI: http://dx.doi.org/10.1086/253118
Petrella G., Resti A. (2012), Supervisors as Information Producers: Do Stress Tests Reduce Bank Opaqueness?, June, 2nd International Conference of the Financial Engineering and Banking Society (F.E.B.S): Recent Developments in Financial Markets and Banking, London. DOI: http://dx.doi.org/10.2139/ssrn.1968681
Pisani-Ferry, J., Sapir A. (2010), Banking crisis management in the EU: an early assessment, ?Economic Policy?, Issue 62. DOI: http://dx.doi.org/10.1111/j.1468-0327.2010.00243.x
Regling K., Watson M. (2010), A Preliminary Report on The Sources of Irelands Banking Crisis, May, Preliminary Report, Commission of Investigation into the Banking Sector in Ireland.
Rime B. (2001), Capital Requirements and Bank Behaviour: Empirical Evidence for Switzerland, ?Journal of Banking and Finance?, Vol. 25, Issue 4. DOI: http://dx.doi.org/10.1016/S0378-4266(00)00105-9
Rochet J. (1992), Capital requirements and the behavior of commercial banks, ?European Economic Review?, Vol. 36, Issue 5. DOI: http://dx.doi.org/10.1016/0014-2921(92)90051-W
Saraiva C., Biggadike O. (2010), Euro Falls as Stress Test Results Fail to Alleviate Banking Risk Concern, 24 July.
Summers B. (1975), Loan commitments to business in United States banking history, ?Economic Review?, Federal Reserve Bank of Richmond.
The Financial Times (2011), Not that stressful, 17 July, The Financial Times.
Van den End J.W. (2010), Liquidity Stress-Tester: A Model for Stress-testing Banks Liquidity Risk, CESifo Economic Studies, Vol. 56, Issue 1.
Van den End W.A. (2011), Credit and liquidity risk of banks in stress conditions: Analyses from a macro perspective, October, Ph.D. Thesis, University of Groningen.
Wilson H. (2011), European Banking Authority was hobbled over stress tests, 17 July, The Telegraph.
Acharya V., Yorulmazer T. (2007), Too Many to Fail ? An Analysis of Time- Inconsistency in Bank Closure Policies, ?Journal of Financial Intermediation?, Vol. 16, Issue 1. DOI: http://dx.doi.org/10.1016/j.jfi.2006.06.001
Aikman D., Alessandri P., Eklund B., Gai P., Kapadia S., Martin E., Mora N., Sterne G., Willison M. (2009), Funding liquidity risk in a quantitative model of systemic stability, June, Bank of England, Working Paper, No. 372. DOI: http://dx.doi.org/10.2139/ssrn.1344287
BBC (2011), German bank Helaba to pull out of stress tests, 13 July, BBC News Business.
BCBS, Basel Committee on Banking Supervision (2009), Principles for sound stress testing practices and supervision, May, Bank for International Settlements.
Blum J. (1999), Do bank capital adequacy requirements reduce risks in banking?, ?Journal of Banking and Finance?, Vol. 23. DOI: http://dx.doi.org/10.1016/S0378-4266(98)00113-7
Brunetti C., Di Filippo M., Harris J.H. (2011), Effects of Central Bank Intervention on the Interbank Market during the Subprime Crisis, ?Review of Financial Studies?, Vol. 24, Issue 6. DOI: http://dx.doi.org/10.1093/rfs/hhq123
Burke M. (2011), The support given to EU banks is killing the recovery, 17 July, The Guardian.
Caballero R.J., Krishnamurthy A. (2008), Collective Risk Management in a Flight to Quality Episode, ?Journal of Finance?, Vol. LXIII, No. 5. DOI: http://dx.doi.org/10.1111/j.1540-6261.2008.01394.x
Cardinali A., Nordmark J. (2011), How informative are Bank Stress Tests?: Bank Opacity in the European Union, Master Thesis in Finance, Lund University.
Chortareas G., Girardone C., Ventouri A. (2012) Bank supervision, regulation, and efficiency: Evidence from the European Union, ?Journal of Financial Stability?, Vol. 8, Issue 4. DOI: http://dx.doi.org/10.1016/j.jfs.2011.12.001
Das S. (2011), The EBA Stress Tests ? Not the Real Thing, 26 July, Eurointelligence,
Dash E. (2009), If Its Too Big to Fail, Is It Too Big to Exist?, ?New York Times?, Week in Review, 20 June,
Ellsberg D. (1961), Risk, Ambiguity, and the Savage Axioms, ?Quarterly Journal of Economics?, Vol. 75, No. 4. DOI: http://dx.doi.org/10.2307/1884324
Elul R. (2008), Liquidity Crises, ?Business Review?, Q2.
European Banking Authority (EBA) (2011), Eu-Wide Stress Test Aggregate Report, 15 July.
Financial Stability Board (2011), Policy Measures to Address Systemically Important Financial Institutions, 04 November.
Finch G., Martinuzzi E., Penty C. (2011), EU Bank Stress Tests Missing Sovereign Defaults Fail to Convince Analysts, 18 July, Bloomberg.
Freixas X. (1999), Optimal bailout policy, conditionality and constructive ambiguity, 15 December, Financial Market Group Discussion Paper 237, London School of Economics.
Goodhart C., Huang H. (2000), A Simple Model of an International Lender of Last Resort, ?Economic Notes?, Vol. 29, Issue 1. DOI: http://dx.doi.org/10.1111/1468-0300.00022
Gorton, G. and Winton, A. (1995). Bank capital regulation in general equilibrium. Wharton Financial Institutions Centre, Working Paper.
Holmstrom B., Tirole J. (1998), Private and Public Supply of Liquidity, ?Journal of Political Economy?, Vol. 106, No 1. DOI: http://dx.doi.org/10.1086/250001
Hovakimian A., Kane E.J. (2000), Effectiveness of capital regulation at U.S. commercial banks, 1985 to 1994. ? Journal of Finance? Vol. 55. DOI: http://dx.doi.org/10.1111/0022-1082.00212
Micossi S. (2012), Unholy compromise in the eurozone and how to right it, July, CEPS, No. 277.
Moulton H.G. (1918a), Commercial Banking and Capital Formation: I, ?Journal of Political Economy?, Vol. 26, No. 5. DOI: http://dx.doi.org/10.1086/253104
Moulton H.G. (1918b), Commercial Banking and Capital Formation: II, ?Journal of Political Economy?, Vol. 26, No. 6. DOI: http://dx.doi.org/10.1086/253113
Moulton H.G. (1918c), Commercial Banking and Capital Formation: III, ?Journal of Political Economy?, Vol. 26, No. 7. DOI: http://dx.doi.org/10.1086/253118
Petrella G., Resti A. (2012), Supervisors as Information Producers: Do Stress Tests Reduce Bank Opaqueness?, June, 2nd International Conference of the Financial Engineering and Banking Society (F.E.B.S): Recent Developments in Financial Markets and Banking, London. DOI: http://dx.doi.org/10.2139/ssrn.1968681
Pisani-Ferry, J., Sapir A. (2010), Banking crisis management in the EU: an early assessment, ?Economic Policy?, Issue 62. DOI: http://dx.doi.org/10.1111/j.1468-0327.2010.00243.x
Regling K., Watson M. (2010), A Preliminary Report on The Sources of Irelands Banking Crisis, May, Preliminary Report, Commission of Investigation into the Banking Sector in Ireland.
Rime B. (2001), Capital Requirements and Bank Behaviour: Empirical Evidence for Switzerland, ?Journal of Banking and Finance?, Vol. 25, Issue 4. DOI: http://dx.doi.org/10.1016/S0378-4266(00)00105-9
Rochet J. (1992), Capital requirements and the behavior of commercial banks, ?European Economic Review?, Vol. 36, Issue 5. DOI: http://dx.doi.org/10.1016/0014-2921(92)90051-W
Saraiva C., Biggadike O. (2010), Euro Falls as Stress Test Results Fail to Alleviate Banking Risk Concern, 24 July.
Summers B. (1975), Loan commitments to business in United States banking history, ?Economic Review?, Federal Reserve Bank of Richmond.
The Financial Times (2011), Not that stressful, 17 July, The Financial Times.
Van den End J.W. (2010), Liquidity Stress-Tester: A Model for Stress-testing Banks Liquidity Risk, CESifo Economic Studies, Vol. 56, Issue 1.
Van den End W.A. (2011), Credit and liquidity risk of banks in stress conditions: Analyses from a macro perspective, October, Ph.D. Thesis, University of Groningen.
Wilson H. (2011), European Banking Authority was hobbled over stress tests, 17 July, The Telegraph.
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Published
2013-06-30
How to Cite
Llorent, J., Melgar, M. del C., Ordaz, J. A., & Guerrero, F. M. (2013). Stress Tests and Liquidity Crisis in the Banking System. Equilibrium. Quarterly Journal of Economics and Economic Policy, 8(2), 31–43. https://doi.org/10.12775/EQUIL.2013.012
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Section
Financial Markets During the Crisis
