Testing the Stress Test
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