Fed Plans to Disclose More About Big-Bank Stress Tests - ABI

The Federal Reserve yesterday proposed disclosing more about its big-bank stress tests, in response to criticism from bankers who have said the exams’ results are hard to understand, the Wall Street Journal reported. The proposal, if adopted, would have the Fed publish how different loan portfolios perform under the statistical models it uses to calculate whether banks can survive a hypothetical recession. The loan data would be published each year before the tests are run. The proposal stops short of fully disclosing the Fed’s statistical models, a move that some Fed officials believe would allow banks to game the exams. The new loan disclosures show the characteristics of three sets of 200 loans: a higher-risk portfolio, a lower-risk portfolio and an average one. The Fed also disclosed the loss rates that its models calculated for those loan portfolios based on the 2016 stress-test scenario.

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