Andrew Haldane, Executive Director for Financial Stability, Bank of England diagnoses the failure of bank stress tesing in this speech given at the Marcus-Evans Conference on Stress-Testing.   He speaks of the Oct 87 crash, the LCTM hedge fund 98 failure as well as the 2007/8 crash. Why Banks Failed the Stress Test:  Bank of England pdf He sees three categories of failure: Disaster Myopia Essentially this is positive thinking that increases the longer since the last disaster.  He only somewhat jokingly wonders whether “10 years is the threshold heuristic for risk managers.” Network externalities He speaks of the financial system … Continue reading Disaster Myopia and other causes of banks’ problems