economy
Central bank bosses enlist for war game to gauge threat of Lehman-style bust
Finance chiefs to join exercise in Washington designed to assess how they would handle collapse of significant bank
TL;DR
- Central bank and treasury leaders from the UK, US, and EU will participate in a war game in Washington.
- The exercise will simulate responses to the collapse of a globally significant bank, akin to Lehman Brothers.
- Growing concerns about financial stability risks include AI, risky private credit lending, and potential disruption from the US-Israel war on Iran.
- The war game is a 'desktop' stress test held behind closed doors at the Federal Deposit Insurance Commission (FDIC).
- The FDIC stated the exercise aims to enhance understanding of resolution regimes, strengthen cross-border coordination, and promote confidence in orderly resolution of G-SIBs.
- Such stress-testing exercises have become common since the 2008 financial crisis to prevent major bank failures.