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We don't need even close to these adverse scenarios to cause major havoc.

Eurodollar University

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The Effects of the Fed's Stress Test on Capital Ratios

The Fed's stress test is designed really for the same reason that capital ratios are designed, which is to give the public a sense of confidence. But it only stress tested in the United States to 23 largest banks. So how can this be useful at all? Where's the useful information here? It's instead all the assumptions and calculations that the Fed goes through to put together its adverse scenarios. We get an idea of what these models are thinking as far as what might the downside be that we could be facing in the very near term future.

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