Corporate governance failings, rather than inadequate
capital reserves, are shaping up to be banks' biggest
vulnerability in future stress tests.
In the recent US round of tests, the Federal Reserve (Fed)
objected to several banks' capital plans due to qualitative
deficiencies in their governance frameworks, analyses and
internal controls when performing stress testing.
This marks a seachange in regulatory approach; and European
banks can learn important lessons from the US results.
The key takeaway...