53 Pages Posted: 14 Feb 2012 Last revised: 4 Apr 2013
Date Written: February 13, 2012
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: 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
By Eugene Fama