Fed weighs reforms to stress tests
Powell says tests must evolve; Quarles and Fed watchers present potential improvements
Stress tests must evolve to keep banks from becoming too complacent, Federal Reserve chairman Jerome Powell said on July 9.
“If the stress tests do not evolve, they risk becoming a compliance exercise, breeding complacency from both supervisors and banks,” Powell said in prepared remarks for a stress-testing conference at the Boston Fed.
The next episode of financial instability may be “messy and unexpected”, he added, so banks must be ready for both foreseen and unforeseen events.
The tests
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