Although the severely adverse scenarios always include severe recessions and sharp declines in asset prices, in past years, they have been accompanied by large declines in Treasury yields, which have resulted in capital gains on these securities. 8 In contrast, in this year’s severely adverse scenario, yields on longer-maturity Treasury securities are flat.
Reforms Are Achieving Their Policy Objectives But More Work Is Needed We have to ask ourselves, however, whether we have addressed the problem set out by Mervyn King in the wake of the global financial crisis. Can authorities now resolve complex international banks without recourse to public funds, while maintaining financial stability?