85–104. BIS central bankers’ speeches  3  activities, can directly limit risk-taking. Second, through the use of appropriate carrots and sticks, regulators can enlist the private sector in monitoring risk-taking.
For example, the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) process, the descendant of the bank stress tests of 2009, requires not only that large financial institutions have sufficient capital to weather extreme shocks, but also that they demonstrate that their internal risk-management systems are effective.9 In addition, the results of the stress-test portion of CCAR are publicly disclosed, providing investors and analysts information they need to assess banks’ financial strength.