Post Stress Test Disorder

Now that the stress tests are over, it looks like the other shoe to drop may be certain changes in leadership at the nation's largest financial institutions.  According to a report by CNN and Fortune Magazine, regulators are now interested in the ability of bank leaders to properly manage an institution's risk profile.  Here is what was reported.

The nation's leading banks may have been deemed solvent, but it remains to be seen whether top management at those firms will soon go bust. Among the findings in its two-month long "stress test" program announced May 7, the government not only told 10 institutions to raise a total of $75 billion in additional capital, but also pushed banks to take a hard look at their leadership. Industry regulators specifically asked banks to review both top executives and board members over the next month "to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment."

Performance to date indicates some institutions have developed "post stress test disorder" and changes may be needed. The only question is whether the changes will be made on their own volition or not.