Stress-test transparency: how much is too much?
The transparency drive to disclose bank stress-test results comes with costs
Stress tests demonstrated their value when they were deployed during the global financial crisis. They showed investors that most banks had sufficient capital to withstand shocks, so restoring market confidence in most of the financial sector. Now, stress tests are routinely used by supervisors as a tool to gauge the resilience of banks and the overall banking system to specific, credible shocks.
But the increased use of stress tests has also resulted in questions about transparency: just how
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