Capital Requirements in Supervisory Stress Tests and their Adverse Impact on Small Business Lending
Aug 22, 2017
The Clearing House (TCH) research shows that "stress tests are imposing dramatically higher capital requirements on certain asset classes - most notably, small business loans and residential mortgages - than bank internal models and Basel standardized models."
CCAR Scenarios are Countercyclical, but Fed Staff's Projections show them to be Farfetched
May 17, 2017
Under the Federal Reserve’s published standard, the severely adverse scenario used in its annual CCAR stress tests should be constructed to “generate scenarios that…do not induce greater procyclicality in the financial system and macroeconomy” and to match “…severe post-war U.S. recessions….” We conclude that, when evaluated using the assessment of the outlook that the Fed staff provides the Federal Open Market Committee (FOMC), the supervisory stress scenarios are countercyclical but extraordinary implausible.
Are the Supervisory Bank Stress Tests Constraining the Supply of Credit to Small Businesses?
May 11, 2017
The Clearing House (TCH) research finds that the U.S. stress tests are constraining the availability of small business loans secured by nonfarm nonresidential (NFNR) properties, which account for approximately half of small business loans on the books of all banks.
Comment on the OFR brief "Capital buffers and the future of bank stress tests"
Feb 13, 2017
On Tuesday, researchers at the Office of Financial Research (OFR) published a brief – "Capital Buffers and the Future of Bank Stress Tests." The OFR note simply asserts that tighter is better and makes no consideration of the negative consequences for economic growth and employment that would result. Moreover, the reasons the note provides for their suggested change are myopic or flawed.
New Research Estimates Credit Allocation Encouraged by CCAR Stress Tests
Jan 31, 2017
The Clearing House research note finds that the Federal Reserve’s CCAR stress test is imposing dramatically higher capital requirements on certain asset classes – most notably, small business loans and residential mortgages – than Basel standardized models and banks’ internal models that are approved by the Federal Reserve.