Training course on Stress Testing and Scenario Analysis for Banks by Central Banks

Module 1: Introduction to Stress Testing

Purpose and evolution of stress testing

Role in supervision and financial stability policy

Lessons from the global financial crisis and recent shocks

Module 2: Stress Testing Frameworks

Microprudential vs. macroprudential perspectives

Top-down vs. bottom-up stress testing

Supervisory vs. bank-led stress tests

Module 3: Scenario Design and Construction

Macroeconomic, market, and idiosyncratic scenarios

Baseline, adverse, and severe scenarios

Climate-related and geopolitical risk scenarios

Reverse stress testing approaches

Module 4: Risk Channels in Stress Testing

Credit risk modeling (default probabilities, credit losses)

Market risk shocks (interest rates, FX, equity, commodities)

Liquidity risk (LCR, NSFR, funding gaps)

Operational and cyber risks

Module 5: Quantitative Models and Tools

Sensitivity analysis and stress parameters

Econometric and balance sheet projection models

System-wide solvency and contagion modeling

Software tools (Excel, MATLAB, R, Python, EViews, proprietary systems)

Module 6: Systemic Stress Testing

Interbank contagion and network models

Macro-financial linkages and feedback loops

Interaction with macroprudential policy

Module 7: Supervisory Stress Testing Practices

Basel Committee and BIS guidance

ECB and EBA stress testing frameworks

Federal Reserve CCAR/DFAST methodology

IMF FSAP stress testing approaches

Module 8: Communication of Stress Test Results

Designing reports for internal and external stakeholders

Policy signaling and market expectations

Transparency vs. confidentiality considerations

Module 9: Using Stress Test Results in Policy

Informing supervisory interventions (capital add-ons, restrictions)

Macroprudential measures (countercyclical buffers, liquidity rules)

Crisis preparedness and resolution planning

Module 10: Case Studies and Global Experiences

EU-wide stress tests (EBA)

U. S. Federal Reserve CCAR experience

Stress testing in emerging markets and small open economies

Module 11: Emerging Topics in Stress Testing

Climate stress testing (transition and physical risks)

Fintech and cyber resilience testing

Integration of machine learning in scenario analysis

Module 12: Practical Workshop and Capstone Project

Hands-on design of a stress testing exercise

Construction of baseline and adverse scenarios

Running a simplified top-down stress test on bank balance sheets

Presenting results and policy implications