Macro Stress Testing and an Application on Turkish Banking Sector

摘要

Especially after the recent financial crisis that started in mortgage markets and spread all over international markets, in order to better monitor financial risks, the importance and use of stress testing has increased. In this study, top-down macro stress testing from a supervisory perspective was analyzed and discussed in general terms. Then, probable effects of credit, interest rate, exchange rate, and contagion risks on capital adequacy of Turkish banking sector in specified baseline and adverse scenarios were examined. First, different satellite panel econometric models for corporate and retail loans were used to estimate loan growth and non-performing loans. Second, model results were utilized to see effects of macro-economic scenarios on Turkish banking system according to the Basel's standard and economic capital approaches. Results of the study showed that economic growth and interest rates change had significant effects on corporate loans while along with these variables unemployment rate had significant effect on retail loans. Moreover, economic growth, exchange rates, and unemployment rate had significant impacts on corporate non-performing loans while only economic growth and unemployment rate had significant impact on non-performing retail loans. According to the study results, while there was no significant impact of exchange rates on net income of the sector because of low level net foreign currency positions, the main effect was on capital adequacy via revaluation of foreign currency denominated risk weighted assets. We found that the robust capital base of Turkish banking sector was a crucial factor in resilience of the sector' capital adequacy against financial shocks.