BoE stress tests 'worse than useless' says thinktank

Use of 'insufficiently stressful' scenarios

The Bank of England stress tests are fatally flawed and providing "false comfort", according to a new research paper by the Adam Smith Institute.

In a paper today entitled No Stress II: The flaws in the Bank of England's stress testing programme, the free market thinktank said these tests were unreliable and highlighted there had not been a single case worldwide where stress testing had provided a warning of a financial crisis. Stress tests assess the potential fall in bank's capital in the event of adverse economic conditions and are intended to help understand how banks would cope in financial crises. However, the paper said that, instead of providing credible assurance that the banking system is safe, they found the Bank of ...