NBR preparation for the crisis: quarterly stress tests and bankruptcy simulation

Simulating bankruptcy of a bank, putting together action plans in case of a systemic crisis and quarterly stress tests for banks have been some of the exercises conducted by the NBR (National Bank of Romania) last year in order not to be caught off guard by the crisis. A new chapter was introduced by the NBR in the 2008 annual report – “Planning in preparation for unpredictable situations and management of financial crises.” Staging the simulation of a financial crisis, six-month stress tests for banks, multilateral cooperation agreements with ministries and central banks in the EU, and setting up a financial crisis management department – this is how the NBR prepared for the crisis in Romania. “The National Bank of Romania has been very concerned about developing financial crisis management procedures and instruments in line with its legal duties. In view of this, the central bank staged an exercise entailing the simulation of a financial crisis. (…) In the exercise, a bank – a Romanian corporate entity – faced a liquidity shortage as a result of an internal fraud, with major negative consequences on the rest of the Romanian financial system,” reads the report.