Team Play: The Context of Economic Capital 247 Danske Bank adds the increases in regulatory and economic capital that result from the scenario to the amount of economic and regulatory capital in the base case. This raises a question on its capital adequacy objectives: Does it want to have a capital buffer on top of economic capital? It is desirable that an institu- tion establishes a clear relation between the results of the stress test and the risk appetite and capital objectives of the institution. Another example of a stress test is found in the 2007 annual report of Swiss Re. Swiss Re discloses the estimated pre-tax claims in case a specific event would occur, including an Atlantic hurricane, a European windstorm, a Califor- nia earthquake, a Japanese earthquake, and a lethal pandemic. Risk limits are set to ensure that the losses will remain within the risk tolerance of the institu- tion. However, no impact on economic or regulatory capital is disclosed. Swiss Re also describes a credit stress test on its portfolio. The credit stress test assumes that the portfolio is subject to the worst default rates by rating category that have been observed by Moody's between 1983 and 2004. Again, only the decrease in available capital (i.e., the loss in value) due to credit losses is shown and not the impact on regulatory required or economic capital. A question is whether it is reasonable to expect that economic capital will or should change as the result of a single event, which we will try to answer in the next section.