Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/193610 
Year of Publication: 
2018
Series/Report no.: 
ESRB Occasional Paper Series No. 15
Publisher: 
European Systemic Risk Board (ESRB), European System of Financial Supervision, Frankfurt a. M.
Abstract: 
Existing stress tests do not capture feedback loops between individual institutions and the financial system. To identify feedback loops, the European Systemic Risk Board has developed macroprudential surveys that ask banks and insurers how they would behave in a macroeconomic stress scenario. In a pilot application of these surveys, we find evidence of herding behaviour in the banking sector, notably concerning credit retrenchment. Results show that the consequences can be large, potentially undoing the initial effects of banks' remedial actions by worsening their solvency position. In contrast, insurers' responses to the survey provide little evidence of herding in response to macroeconomic stress. These results highlight the usefulness of macroprudential surveys in identifying feedback loops.
Subjects: 
financial instability
macroprudential
stress tests
surveys
JEL: 
E30
E44
G10
G18
G21
G22
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-9472-039-9
Document Type: 
Research Report

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