Stressed Out: The Limits of Analytics

Stress Testing in the banking industry has been under intense scrutiny since the crisis began. Results of analyses have underpinned some of the most significant decisions of the recent turmoil, foreshadowing many multi billion Euro capital injections. The coming years will see continuing demands on banks' Stress Testing capabilities, with results used to inform decisions by governments, regulators and investors alike. We broadly support the direction of this move, but remain concerned that too much faith is being placed in a single technique.