Ten years after the Federal Reserve’s crisis-era bank stress test, it is time to recalibrate the stress tests for “peacetime.” Outside of a crisis, supervisors should tailor stress tests to focus on their comparative advantages by taking a macroprudential focus, with severe scenarios that enable them to learn about emerging risks in both traditional and shadow banking sectors. In peacetime, also, supervisors should emphasize risk- management practices and be wary of forcing rapid changes in capital levels for individual banks, while linking stress-test results with countercyclical capital buffers across the system.
Feldberg, Greg and Metrick, Andrew
"Stress Tests and Policy,"
Journal of Financial Crises: Vol. 3
Iss. 1, 1-19.
Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol3/iss1/1