I would like to conclude by stating that banking systems are much stronger since the implementation of stress-testing frameworks – and this has contributed in part to the improvement of economies in many countries. Stress tests are forward-looking and focus on improbable but plausible risks, as opposed to common risks. As a result, they complement conventional capital and leverage ratios.
The disclosure of the results of stress-testing exercises, coupled with firms’ disclosure of their own stress-test results, provides market participants with deeper insight and confidence, not only into the financial strength of banks, but also into the quality of their risk management and capital planning. Stress testing is also proving highly complementary to supervisors’ monitoring and analysis of potential systemic risks.