Big global banks continue to fudge the numbers that regulators use to judge banks’ soundness, says Richard J. Herring, Wharton finance professor. In this Knowledge at Wharton interview, Herring notes that the numbers used for many key capital measurements are “obscure” rather than “transparent,” which makes the whole stress-test process unreliable and “subject to manipulation.” It also makes it impossible to compare one bank’s soundness relative to another bank. Herring is a co-chair of the Shadow Financial Regulatory Committee, an unofficial group of former regulators, lawyers and academics who review ideas for new regulations and other financial proposals.

For more from this interview with professor Herring, see:

Big Banks Keep Watering Down Global Reserve Rules

The Global Bank Regulatory System Remains Crippled