When it comes to planning for the future, a top Federal Reserve official said her advice to bankers is to "hope for the best and plan for the worst."

"That means anticipating a range of bad and worst-case scenarios that reflect local economic conditions and a bank's particular risk profile," Janet Yellen, the president and chief executive of the Federal Reserve Bank of San Francisco, told the Idaho Bankers Association on Tuesday. "It can be helpful to perform stress tests based on these scenarios to assess potential effects on earnings and capital, and to develop appropriate contingency plans."

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