Many in the global financial community are focusing on stress tests to assess the fiscal health of the global financial system, and some believe such stress testing of banks is a significant step forward in protecting bank shareholders, taxpayers and the global economy.

The stress tests do indicate the relative stability among the banks tested, for the particular economic risk scenarios included. However, the tests misdiagnose the ability, or inability, of a bank's immune system to resist some of its biggest threats. Looking at this from an ERM perspective, the tests have several shortcomings.

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