Purpose

• Federal banking regulators examine large bank's records to determine the future economic viability of these banks. Stress tests are important during economic hardships to decide if the bank can withstand the hardships. Regulators determine if these banks need to raise their financial reserves.
  
  

Process

• Federal regulators examine financial records of the banks in question. They then project future economic conditions and decide if they feel the banks will make it through the conditions or not. They use future predictions about economy growth or shrinkage and unemployment rates. Economic growth is vital for banks because without growth, banks do not loan out as much money. Unemployment rates matter too because with high unemployment, customers are more likely to default on loans.
  
  

Results

• In spring of 2010, the federal government put 19 banks to the test. These banks each have more than $100 billion in assets and make up an estimated two-thirds of all banking assets in the U.S. Some banks included JP Morgan Chase, Bank of America and Goldman Sachs. The federal regulators found approximately 10 of the institutions may experience trouble in the ensuing two years.