The nation of Cyprus saw its banking sector come crashing down over the last two weeks. The final consequences are still unknown, but the episode is sure to leave its economy in ruin.

There is a tremendous amount to learn from the crash. One lesson is the value and accuracy of stress tests that regulators impose on banks.

In this video, Fool analysts Matt Koppenheffer and Morgan Housel show how 2011's stress tests of European banks completely backfired.

 

Morgan Housel has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.