Stress Testing as an Approach for Measuring Financial Stress and Its Impact on Predicting Credit Risks: An Analytical Study
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Abstract
Nowadays, there are several issues or risks facing the banking sector, therefore, it is necessary to banks apply some methods to reduce that problems and risks. As results, this study aimed to apply stress tests to measure financial stress for predicting credit risks in banks. The research was based on the main hypothesis that by applying stress scenario tests, it is possible to predict credit risks. The research used a descriptive and analytical methods to test the hypothesis. The study population was the Iraqi banking sector, with a purposive sample taken from Ashur International Bank for Investment. In the main findings, the research concluded that stress testing scenarios contribute to predicting credit risks. Finally, the study recommends emphasizing further investment in diverse investments that yield higher returns.
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