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US releases stress test process

Just released at 14:00 EST / 19:00 GMT and cut and pasted from the Federal Reserve website:

The Supervisory Capital Assessment Program: Design Summary (287 KB PDF)

A white paper describing the process and methodologies employed by
the federal banking supervisory agencies in their forward-looking
capital assessment of large U.S. bank holding companies was published
on Friday.

The white paper is intended to assist analysts and other interested
members of the public in understanding the results of the Supervisory
Capital Assessment Program, expected to be released in early May. All
U.S. bank holding companies with year-end 2008 assets exceeding $100
billion were required to participate in the assessment, which began
February 25. These institutions collectively hold two-thirds of the
assets and more than half the loans in the U.S. banking system.

More than 150 examiners, supervisors and economists from the Federal
Reserve, Office of the Comptroller of the Currency, and Federal Deposit
Insurance Corporation participated in this supervisory
process. Starting from two economic scenarios–a consensus estimate of
private-sector forecasters and an economic situation more severe than
is generally anticipated–they developed a range of loss estimates and
conducted an in-depth review of the banks’ lending portfolios,
investment portfolios and trading-related exposures, and revenue
opportunities. In doing so, they examined bank data and loss
projections, compared loss projections across firms, and developed
independent benchmarks against which to evaluate the banks’
estimates. From this analysis, supervisors determined the capital
buffer needed to ensure that the firms would remain appropriately
capitalized at the end of 2010 if the economy proves weaker than
expected.

(thanks to Steve Audino for the headsup)

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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