(v)  Stress tests  Stress tests used by banks probably do not adequately reflect their substantial reliance on liquid capital and money markets for managing, distributing and hedging risks. Some of the problems (eg., difficulties in the leveraged loan market, the valuation of complex products) are not typically incorporated in stress tests.
Stress tests at many banks also may fail to adequately capture the potentially significant growth in balance sheet exposures resulting from contingent credit and liquidity facilities to ABCP conduits. Moreover, stress tests tend to focus on a few risks and thus often fail to capture the potential interactions between many different risk factors.