Bankrate.com

“The purpose of stress tests is to see if banks are adequately capitalized for unexpected losses due to credit, market and operational risks,” says Mayra Valladares, managing partner at MRV Associates. “When we talk about stresses, it’s those extreme events.”

The biggest blind spot in the tests may be that regulators don’t test banks against a scenario where there’s some kind of fraud or malfeasance on the part of management, an all-too-common occurrence in the years leading up to the financial crisis, Valladares says

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