Stress-Testing, the IMF Way

For fans of stress-testing, the IMF has a new primer on what it takes to make one credible. (Remember those early stress-tests in Europe? Banks passed the tests only to fail months later…) The IMF report is long but has some pretty cool stuff, including charts at the end comparing the way various entities have conducted stress tests.

The final conclusion, however, is kind of funny and makes you wonder if there will be a run on rabbit's feet and four-leaf clovers:

"[I]t would be remiss to discount the importance of luck in any crisis stress test.

Its successful implementation may well require a dose of good fortune, e.g., in areas such as the actual health of banks, the timing of the exercise, market conditions and public receptiveness to the disclosures."

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