Why stress testing is important for financial institutions?
Why stress testing is important for financial institutions?
Supervisors are increasingly using stress tests as a means of imposing tougher capital requirements than are set in the minimum capital standards. The tougher the stress test, the higher the number of banks that will fail the test, even if they currently meet minimum capital standards on an un-stressed basis.
Banks that “fail” the tests are required to improve their capital ratios, and are under pressure to achieve these improvements as soon as possible.
What to expect in the future?
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