The global financial crisis has placed the spotlight squarely on bank stress tests. Stress tests conducted in the lead-up to the crisis, including those by IMF staff, were not always able to identify the right risks and vulnerabilities. Since then, IMF staff has developed more robust stress testing methods and models and adopted a more coherent and consistent approach. This paper articulates the solvency stress testing framework that is being applied in the IMF's surveillance of member countries' banking systems, and discusses examples of its actual implementation in FSAPs to 18 countries which are in the group comprising the 25 most systemically important financial systems ("S-25") plus other G-20 countries. In doing so, the paper also offers useful guidance for readers seeking to develop their own stress testing frameworks and country authorities preparing for FSAPs. A detailed Stress Test Matrix (STeM) comparing the stress test parameters applie in each of these major country FSAPs is provided, together with our stress test output templates.

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This Working Paper should not be reported as representing the views of the IMF.

In this article, we use the extreme value theory framework to analyse contagion risk across the international banking system. We test for the likelihood that an extreme shock affecting a major, systemic global bank would also affect another large local or foreign counterpart, and vice versa. Our results reveal several key trends among major global banks: contagion risk among banks exhibits 'home bias', individual banks are affected differently by idiosyncratic shocks to their major counterparts and banks are affected differently by common shocks to the real economy or financial markets. In general, bank soundness seems more susceptible to common (macro and market) shocks when the global environment is turbulent; this may have important implications for global financial stability especially during stressful periods. Not surprisingly, our findings also suggest that bank contagion risk has risen over time, which emphasizes the need for continuing collaboration on cross-border supervision and crisis management.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.In this paper, we examine returns in the Chinese A and B stock markets for evidence of calendar anomalies. We find that both cultural and structural (segmentation) factors play an important role in influencing the pricing of both A-and B-shares in China. There is some evidence of a February turn-of-the-year effect, partly owing to the timing of the Chinese Lunar New Year (CNY); and the holiday effect around the CNY period is stronger and more persistent compared with the other public holidays. The segmentation between the two markets is apparent in the day-of-the-week effect, where B stock markets tend to post significant negative returns on Tuesdays, corresponding with overnight developments in the United States, while significant negative returns are observed on Mondays in the A stock markets. Investment strategies based on some of these calendar anomalies, and allowing for transaction costs, suggest that the A stock markets tend to offer more economically significant returns. JEL Classification Numbers: G11, G12, G14, G15