A02 · PROCESS · scenariosGRA dossier · service level R0
GRABanking NexusEstablished
Sector scenarios

Published scenarios

Sector-level scenarios for Banking Nexus are published here with their assumptions and limits. They describe aggregate exposures; they are not forecasts and not investment advice.

Publisher
The Global Risks Alliance
Field
Financial stability, Capital markets and investment, Climate and hazards
Canvas · scoping to reviewDesign, not a record
Published scenarios: climate scenario analysis pipelineOrderly, disorderly and hot house scenarios supply pathways for carbon prices and macro variables; transition and physical channels change sector and asset outcomes; credit parameters and portfolio losses follow, and results are disclosed with their limits. Design of the process, not a record of a run.

Fig.A programme from scoping to the owner's decision. Design, not a record.

01In brief

The short answer.

Banking Nexus sector scenarios are published, aggregated descriptions of how exposures in the financial stability field could evolve under stated assumptions, read against frameworks such as Basel III framework. They describe sector-level exposures with their limits; they are not forecasts, assess no individual firm and are not investment advice.

02Spatial finance

A loan book under scenario families.

How physical and transition risk could reach a loan book under different scenarios. Illustrative design values.

A loan book across Europe under physical and transition risk.Design values; NGFS scenario names are labels only, not stress test results.
03Status

Releases appear as they are reviewed.

Analysis runs in Nexus Foundry; reviewed releases are listed here.

04Scenario families

From supervisory exercises to sector scenarios.

Exercise typeHorizonWhat it tests
Annual supervisory stress tests (for example the US supervisory stress test or the EBA EU-wide test)Two to three yearsCapital adequacy under macroeconomic severe adverse scenarios
Climate exploratory exercisesLong horizon, often to 2050Exposure to physical and transition pathways, with management actions
NGFS short-term scenariosFive yearsCombined physical and transition shocks with macro-financial variables
Operational resilience scenariosEvent-definedWhether important business services stay within impact tolerance
05Spatial method

A loan book under scenario families.

Sector scenarios on Banking Nexus join geocoded collateral and borrower sites to hazard layers and NGFS transition variables, then apply illustrative damage and revenue functions to show where probability of default and loss given default would move. Values are design values, not estimates for any bank. The NGFS Phase V physical damage function is under review after the retraction of the paper it relied on, so physical results are shown with that caveat. Methods at GCRI scenario stress.

06Key terms

Terms used on this page.

Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.

TermDefinition
ScenarioA plausible description of how the future may unfold under stated assumptions, not a prediction.
Severe but plausible scenarioA disruption scenario extreme enough to test resilience yet realistic enough to occur.
Reverse stress testStarting from a failure outcome and identifying the scenarios that would cause it.
Investment adviceA personal recommendation on investments, a regulated activity in most jurisdictions.
08Questions

Questions and answers.

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