Maybe somebody here can explain something I just doin't seem to be able to understand. Why is it so hard for banks to do a stress test?
They have all the data. If I was CEO of a bank I'd want to be able to get up in the morning and have some idea how much risk and what types of risk my bank was assuming. Especially in a dynamic environment of Fed interest rate changes. I would think they would be doing it all the time. Isn't that what computers do? Simulate scenarios like - What does our bank look like if the Fed raises rates to %2 etc. It makes me feel like they truly just don't want to know so they can do whatever they want.
> Why is it so hard for banks to do a stress test?
They're super involved, requiring a full-time department to prepare for and run. That's a multi-million dollar recurring expense a bank with tens of millions of dollars of profit may not be able to afford.
It isn't hard. They want a try at getting a little more profit in exchange for risk. Stress tests prevent them from taking those risks, therefore they lobby against them and don't do them unless compelled.
They have all the data. If I was CEO of a bank I'd want to be able to get up in the morning and have some idea how much risk and what types of risk my bank was assuming. Especially in a dynamic environment of Fed interest rate changes. I would think they would be doing it all the time. Isn't that what computers do? Simulate scenarios like - What does our bank look like if the Fed raises rates to %2 etc. It makes me feel like they truly just don't want to know so they can do whatever they want.