Securitisation and Regulation News

IMF working paper on next generation system-wide liquidity stress testing

The International Monetary Fund (IMF) has published a working paper which presents a framework to run system-wide, balance sheet data-based liquidity stress tests. The liquidity framework includes three elements: (1) a module to simulate the impact of bank run scenarios; (2) a module to assess risks arising from maturity transformation and rollover risks, implemented either in a simplified manner or as a fully-fledged cash flow-based approach; and (3) a framework to link liquidity and solvency risks. The framework also allows the simulation of how banks cope with upcoming regulatory changes such as Basel III, and accommodates differences in data availability. The IMF has emphasised that the views expressed in this working paper are those of the authors and do not necessarily represent those of the IMF or IMF policy.  

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