Implementing Dodd-Frank Act Stress Testing

DePaul Business and Commercial Law Journal, Vol. 14, No. 3, pp. 323-356, 2016

36 Pages Posted: 22 Mar 2016 Last revised: 12 Mar 2017

See all articles by Margaret Ryznar

Margaret Ryznar

Indiana University Robert H. McKinney School of Law

Frank Sensenbrenner

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS)

Michael Jacobs

Accenture Consulting

Date Written: March 21, 2016

Abstract

In recent years, the question of how to prevent another crippling re-cession has become a prominent one. The answer provided by the Dodd-Frank Act is stress testing, which examines through economic models how banks would react to a bad turn of economic events, such as negative interest rates. The first of its kind in the legal literature, this Article offers a model for stress testing that banks should use in complying with Dodd-Frank. Specifically, this Article finds that the Bayesian model that takes into account past outcomes, namely the Federal Reserve’s previous stress test scenarios, is the most accurate model in stress testing.

Suggested Citation

Ryznar, Margaret and Sensenbrenner, Frank and Jacobs, Michael, Implementing Dodd-Frank Act Stress Testing (March 21, 2016). DePaul Business and Commercial Law Journal, Vol. 14, No. 3, pp. 323-356, 2016. Available at SSRN: https://ssrn.com/abstract=2752815 or http://dx.doi.org/10.2139/ssrn.2752815

Margaret Ryznar (Contact Author)

Indiana University Robert H. McKinney School of Law ( email )

530 West New York Street
Indianapolis, IN 46202
United States

Frank Sensenbrenner

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

Michael Jacobs

Accenture Consulting ( email )

1345 Avenue of the Americas
New York, NY 10105
United States
9173242098 (Phone)

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