Title: Using stress testing model in measuring the impact of the financial crisis on the Jordanian commercial banks

Authors: Fouzan Al Qaisi; Asem Tahtamouni

Addresses: American University of Madaba, P.O. Box 2882, Amman 11821, Jordan ' American University of Madaba, P.O. Box 2882, Amman 11821, Jordan

Abstract: This paper aims to answer multiple questions regarding Jordanian bank stability under credit, market, and liquidity shock scenarios in order to evaluate bank solvency and liquidity. The paper will use stress testing model to measure the effect of the financial crisis in 2008 on the Jordanian commercial banks. It will conduct various stress testing scenarios on 13 Jordanian banks with the aim of better understanding the risk profile of the Jordanian banking system. Two spreadsheet models are utilised to conduct credit, market and liquidity shocks to assess the performance of the banks under each shock. The findings of this paper demonstrate that the Jordanian banking system is generally able to withstand reasonable shocks of each type, with some addressable weaknesses such as collateral under-provisioning and liquid asset shortcomings.

Keywords: stress testing model; financial crisis; bank stability; commercial banking sector; Jordan.

DOI: 10.1504/IJBCRM.2021.119939

International Journal of Business Continuity and Risk Management, 2021 Vol.11 No.4, pp.310 - 323

Received: 09 Dec 2019
Accepted: 17 Mar 2020
Published online: 04 Jan 2022 *

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