Stressed Out: Macroprudential Principles for Stress Testing

53 Pages Posted: 14 Feb 2012 Last revised: 4 Apr 2013

David Greenlaw

Morgan Stanley

Anil K. Kashyap

University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER); Federal Reserve Bank of Chicago

Kermit L. Schoenholtz

New York University - Stern School of Business - Department of Economics

Hyun Song Shin

Bank for International Settlements

Date Written: February 13, 2012

Abstract

Since the conference version of this report in February 2011, bank stress tests have been almost continuously in the news. In the United States, the Dodd-Frank Act mandates annual stress tests for key institutions. In early 2011, the Federal Reserve conducted the first test under the Act on major banks, and is currently conducting the second test, the results of which will be announced in early 2012. Europe completed a stress test in July 2011 that ignored many principles of this report. Like the prior European tests in 2010, the 2011 version is now deemed to have failed, so that yet another European stress test exercise is contemplated.

JEL Classification: G21, G28

Suggested Citation

Greenlaw, David and Kashyap, Anil K. and Schoenholtz, Kermit L. and Shin, Hyun Song, Stressed Out: Macroprudential Principles for Stress Testing (February 13, 2012). Chicago Booth Research Paper No. 12-08; Fama-Miller Working Paper. Available at SSRN: https://ssrn.com/abstract=2004380 or http://dx.doi.org/10.2139/ssrn.2004380

David Greenlaw

Morgan Stanley ( email )

1585 Broadway
New York, NY 10036
United States

Anil K. Kashyap (Contact Author)

University of Chicago, Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7260 (Phone)
773 702-0458 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-7260 (Phone)
773-702-0458 (Fax)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Kermit L. Schoenholtz

New York University - Stern School of Business - Department of Economics ( email )

44 W. 4th Street
Suite 7-89
New York, NY 10012
United States
212-998-0868 (Phone)

HOME PAGE: http://w4.stern.nyu.edu/faculty/bio/kim-schoenholtz

Hyun Song Shin

Bank for International Settlements ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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