Loan quality becomes increasingly important in stress tests

04/21/2009 | Bloomberg

As regulators conduct banks' stress tests, they are finding substantial variations in underwriting standards, an official said. The regulators plan to give greater weight to lending practices. "There was a heavy assumption" that accelerated loan defaults were caused by the economic downturn, said Kevin Petrasic, a lawyer at Paul Hastings. "If they find out that these were business decisions, that, in an odd way, is probably a good sign because you can fix this. There are very hard lessons to be learned."

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