Bank trading losses estimated under the Federal Reserve’s annual stress tests were more than three times higher than the amount implied by their market risk-weighted assets, Risk Quantum analysis shows.
Data from this year’s Dodd-Frank Act stress tests (DFAST) show that 43% of total losses projected under the severely adverse stress scenario across 12 of the largest participants were due to trading and counterparty risks. However, market RWAs represent just 13% of total RWAs on average for
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