The Federal Reserve: Considering making 'significant adjustments' to bank stress tests

On December 24th, Golden Ten Data reported that the Federal Reserve is considering making significant adjustments to the annual stress tests of large US banks to drop the fluctuation of test results and increase the transparency of the testing process. The Federal Reserve did not specify how it would adjust, but indicated that they may modify the models for calculating assumed bank losses, average the results over two years, and allow the public to comment before determining the assumed scenarios each year. The Federal Reserve stated that these adjustments are not intended to have a substantial impact on overall capital levels. The Federal Reserve stated, “In recent years, there have been significant changes in the regulatory framework.” “The committee has analyzed the current stress tests in light of the evolving legal environment and decided to make modifications to improve the resilience of the tests.” The industry lobbying group, “Bank Policy Research,” welcomed the Federal Reserve’s statement, considering it a step towards “transparency and accountability”.