Stress Tests

Stress Tests

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.

Read More

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.

Read More

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.

Read More

< 1 2 3 >