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International Monetary Fund. European Dept.

1. A Short Introduction on ML Algorithms 2. Backtesting Performance of Selected Methods APPENDIX I. Data Description CORPORATE LIQUIDITY AND SOLVENCY DURING THE PANDEMIC AND POLICY RESPONSE A. Introduction B. Data and Methodology C. Liquidity and Solvency Gaps Estimates D. Conclusions and Policy Response Going Forward References FIGURES 1. Corporate Sector: Pre-COVID Selected Indicators 2. Firms Distribution by Sector 3. Corporate Sector: Distribution of Firms by Liquidity and Solvency Stance 4. Corporate Sector: Liquidity and Solvency

International Monetary Fund. European Dept.

advanced economies because of the financial costs of the newly-taken credit ( Figure 3.12 , panel 1). Figure 3.11. Leverage Ratio of Pre-COVID-19 Highly Leveraged Firms Sources: Orbis; and IMF staff calculations. Note: Leverage is calculated as the ratio of total liability over book equity. Highly leveraged firms are the 75th percentile of all firms. Boxplots include the mean (cross), median (horizontal bar), the interquartile range, and the 10th and 90th percentiles (whiskers). Figure 3.12. Distribution of Firms by Liquidity and Solvency Stance

International Monetary Fund. Monetary and Capital Markets Department

solvency stress tests . Following the methodology proposed by recent World Bank technical assistance, different deposit run-off rates were assumed for the different banks based on their solvency stance according to solvency stress tests results. 26 Essentially, these run-off rates are directly related to the CAR of each of the banks; the lower the CAR, the higher the run-off rates on deposits. Intuitively, banks which have a weaker solvency stance are more likely to experience larger deposit withdrawals than those banks perceived to be more stable. 37. Similar

International Monetary Fund. Monetary and Capital Markets Department
This note discusses the stress tests that were carried out on Moldova’s banking system as part of the 2014 Financial Sector Assessment Program (FSAP) Update. The objective of this exercise was to assess the resilience of the banking system to major sources of risk. The stress tests were conducted in collaboration with the National Bank of Moldova (NBM), and complement other approaches, such as the analysis of financial indicators and the assessment of the quality of supervision. The stress tests focused on the banking system and covered all 14 banks operating in the country. Top-down solvency stress tests were conducted jointly by the FSAP team and staff from NBM, using supervisory data. These stress tests were complemented by bottom-up stress tests, conducted by individual banks using their own internal models, but applied to the macroeconomic scenarios provided by the FSAP team. In addition, liquidity stress tests, together with complementary sensitivity analysis were also carried out on all banks in the system.
Carlos Caceres, Dan Pan, and Suchanan Tambunlertchai

hard to predict, we use the firms’ net equity position as an objective proxy for quantifying the likelihood a firm will face distress and the resulting potential losses that may be borne by debt and equity investors. These potential losses relate to the firms’ outstanding debt (bonds and loans) as well as changes in equity valuations (for the owners of the firm’s capital or shareholders). In addition to providing a measure of the firms’ solvency stance as well as potential debt and equity losses, the analysis also provides a quantification of these firms’ expected

Carlos Caceres, Dan Pan, and Suchanan Tambunlertchai
This paper analyzes a group of 755 firms, with aggregate indebtedness of US$6.2 trillion, to assess the solvency risks and liquidity needs facing the U.S. corporate sector based on projections of net income, availability and cost of funding, and debt servicing flows under different stress test scenarios. The paper finds that leveraged corporates account for most of the potential losses arising from the macroeconomic stresses associated with the COVID-19 crisis, with a concentration of these losses in the oil and gas, auto, and capital and durable goods manufacturing sectors. However, potential losses from corporate debt write-downs appear to be a fraction of banks’ capital buffers and, given the size of the leveraged segment and the relatively long duration of that sector’s debt, the near-term liquidity needs of these corporates appear modest. Corporate stresses could, however, amplify the current economic downturn—as firms cut investment spending and reduce employment—potentially giving rise to significant indirect losses for the financial system.