Stress Tests: Which of the Big Banks Perform the Best

The Dodd-Frank Wall Street Reform and Consumer Protection Act has made it mandatory for certain financial companies to conduct stress tests to determine whether they have sufficient capital to absorb losses and to support operations during adverse economic conditions.  The objective is to ensure that that they do not pose risks to their communities, other institutions, or the broad economy, and these tests are therefore forward-looking.

Dodd Frank Act stress tests

Banking companies having total assets greater than $50B, and certain non-banking but financial companies designated by the Financial Stability Oversight Council, would be subjected to the Dodd Frank Act (DFA) stress tests thrice a year – once under regulatory supervision, and semi-annually under self-management. The...