About this paper
Regulatory stress testing is central to the continued, safe operation of our financial system. At the same time, regulators have shifted their focus from simply understanding the effects of stress scenarios on credit performance and revenue to making stress testing an integral part of a bank's capital plan. This paper examines the current state of bank stress testing capabilities, as revealed in a GARP and SAS stress testing survey involving 389 respondents. Findings indicate that technology is the weakest link in their stress testing capabilities (compared to resources such as people and expertise). This paper explores the implications of this finding and proposes how banks can address this issue with strategic investments in new capabilities.
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