Office Of Financial Research Update - Incorporating Liquidity Shocks And Feedbacks In Bank Stress Tests

The OFR released today a brief, "Incorporating Liquidity Shocks and Feedbacks in Bank Stress Tests." This brief discusses how stress tests could incorporate four types of shocks — credit, funding, liquidity, and collateral values — and shows that shocks can affect regulatory ratios for capital and liquidity simultaneously. Additionally, in times of stress, a bank’s responses to a binding regulatory ratio can spread shocks to other banks.

The brief is posted at: http://financialresearch.gov/briefs/

The OFR home page is at: http://financialresearch.gov