We test whether measures of potential influence on regulators affect stress test outcomes. The large trading banks - those most plausibly 'Too big to Fail' - face the toughest tests. In contrast, we find no evidence that either political or regulatory connections affect the tests. Stress tests...

We test whether measures of potential influence on regulators affect stress test outcomes. The large trading banks – those most plausibly ‘Too big to Fail' – face the toughest tests. In contrast, we find no evidence that either political or regulatory connections affect the tests. Stress...

Relative performance evaluation (RPE) intensifies competitive pressure by tying executive compensation to the profits of rivals. We show that these contracts make loan syndication harder by reducing banks' willingness to participate in loans underwritten by banks named in their RPE contracts....

This paper studies banks' investment in risk management practices following the Global Financial Crisis and the advent of stress testing. Banks that experienced greater losses during the Crisis exhibit stronger demand for risk management talents. Banks increase their demand for highly skilled...