Yet the approach we took in the SCAP was informed by discussions that had been taking place among supervisors and academics for some time. Not surprisingly, against the backdrop of the crisis, the SCAP experience elaborated and confirmed principles that had been advocated internally by some supervisors, but that had not been broadly incorporated into the practice of regulatory agencies.
First, whether conducted by banks or supervisors, stress tests must consider severe but plausible scenarios, including low probability events with potentially highly adverse effects.