Today’s short post is concerned with the news yesterday that the Bank of England is preparing to put the seven largest banks in the U.K. through an additional stress test , in addition to the resilience test that is conducted annually. The new test, which will examine the bank’s susceptibility to a number of additional aspects, including persistently low rates and higher costs, will run every two years and represents the central bank’s understanding that the volatile environment that we currently inhabit needs to be reflected in the stress tests. So, this post will focus on this new ‘exploratory’ test and assess whether it goes far enough, and whether there are any shortcomings which need to be addressed. The Bank of England has created this additional test so that it may better understand the larger financial environment if the banks in its jurisdiction, as a whole, succumb to the same pressures. The tests, which are based upon 7-year projections , are intended to incorporate g...