Study Shows Bank Risk-Assessment Tool Not Responding Adequately to Market Fluctuations

(PhysOrg.com) -- A new study from North Carolina State University indicates that regulators need to do more to ensure that banks are adequately computing their Value-at-Risk (VaR) to reflect fluctuations in financial markets. The study finds that the tests used by regulators do not detect when VaRs inaccurately account for significant swings in the market, which is significant because VaRs are key risk-assessment tools financial institutions use to determine the amount of capital they need to keep on hand to cover potential losses.

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