Before the beginning of the crisis in 2007–8, regulation failed to cope with the complexities of modern finance and paid insufficient attention to systemic risk. Similarly, risk managers in financial institutions tended to focus on risks in their financial institutions, neglecting systemic...

Existing stress tests do not capture feedback loops between individual institutions and the financial system. To identify feedback loops, the European Systemic Risk Board has developed macroprudential surveys that ask banks and insurers how they would behave in a macroeconomic stress scenario....