Mark910 (< 20)

Testing the Stress Test

June 09, 2009 – Comments (4)

Now that we have more than  a full quarter of 2009 behind us I thought it would be a good exercise to look at the stress test that was administered by the govt. and how the scenarios used in the test have played out.    The test consisted of a baseline scenario and a worst case scenario.  I of course will concentrate on the worst case.

                       Projected Worse Case   Actual          Actual     Grade

Variable            2009     2010              Q12009     May 2009   Pass/Fail

GDP                 –3.3       .05                    -6.6                             Fail

Housing            -22         -7                     -19.1                          *Pass

Unemployment   8.9       10.3                     8.5              9.3         Fail

*The rate of increase arguably says this could be a fail.

So if the test itself actually fails the reality test what does that say for the majority of banks that actually failed this test.  And what about the countries lower tier banks that didn't take the test?     Cheers