The Dodd-Frank Act was passed to help monitor and report on financial conditions after the market crash in 2008. Part of the Dodd-Frank Act requires certain businesses to perform stress tests. Financial stress testing is a forward-looking exercise that assesses whether an organization is sufficiently capitalized to absorb losses during stressful conditions while meeting obligations to creditors and counterparties and continuing to be able to lend to households and businesses.
In the current economic and regulatory environment, it is important for financial services organizations to consider performing stress tests, even if their organization doesn’t fall within the requirement criteria currently outlined in Dodd-Frank. BAI has put together a document on Stress Testing Program considerations to help financial services organizations know what they need to include in their stress test policies. Key components of the document include:
Looking to learn more on how to properly implement or update your policies on stress testing? Download BAI’s: “Stress Testing Program Policy Considerations.”