60 Seconds: What Are the Bank Stress Tests?

The Federal Reserve will announce the results of its 2018 bank stress tests today. But what are they and do the banks actually pass them? Give us 60 seconds and we'll tell you!
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Just because a bank has a big name doesn't mean it's in a good position to cope with market mayhem.

Tons of big name banks were totally caught off guard back when the 2008 financial crisis hit - and the government had to step in and bail them out

So to ensure that does not happen again -- the Federal Reserve now requires them to undergo a series of tests - called stress tests -- to make sure they're prepared for the worst.

These stress tests - also known as the Comprehensive Capital Analysis and Review -- basically put the banks through a bunch of what-if scenarios.

For example:

  • What if the unemployment rate rises to a certain number?
  • What if the equity markets crash by more than X?
  • What is GDP falls by more than X?
  • What if interest rates go up by at least Y%?
  • What if oil rises by some big number? 

And the big question is: does the bank have enough money in reserve if any of the above scenarios happen?

Watch the video above to find out the answer to that question and more!