What are the impacts of stress tests on financial institutions?
Stress tests help assess a financial institution's resilience to economic shocks, ensuring stability.
How often are these stress tests conducted?
Typically, stress tests are conducted annually, but some institutions may perform them more frequently.
What happens if a bank fails a stress test?
If a bank fails, it may need to raise capital, adjust its risk management strategies, or face regulatory actions.
Can stress tests predict future financial crises?
While they can't predict crises, stress tests identify vulnerabilities that could lead to instability.
What are the key components of a stress test?
Key components include scenario analysis, capital adequacy assessment, and evaluation of risk management practices.
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