Should You Care About Bank Stress Tests?

After the last recession and the collapse of the housing market in the U.S., the Dodd-Frank financial reforms were put into place. Part of the legislation requires that, once a year, the big banks are put through a "stress test." But what kind of test is this, and is it really all that relevant? In this video, Motley Fool Analyst Morgan Housel breaks down how these stress tests work, and how they're designed to insure that banks meet the challenges of the last recession. In no way, however, do they insure that banks will be ready for the next recession, which may look entirely different.

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  • Report this Comment On November 17, 2012, at 10:07 AM, mrschnider wrote:

    Regulators do track how a bank will perform when rates go up. The truth is that regulators performed (and still do perform) stress tests through the years, its just that the results are not released as opposed to this new wildly publicised fiasco.

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