The Federal Reserve Board on Tuesday finalized changes to its stress testing program for the nation’s largest and most complex banks. The intent is to make the resiliency assessments “more open, transparent, and effective.”
“The changes are intended to improve public understanding of the program while maintaining its ability to independently test large banks' resilience,” it said in a statement.
Supervisory stress testing allows the Fed to assess whether the largest and most complex financial firms would be sufficiently capitalized during stressful economic conditions to absorb losses, meet obligations to creditors and other counterparties, and continue lending to households and businesses.
Supervisory stress test models are used to produce estimates of post-stress capital ratios for covered companies. Among these tools, the Dodd-Frank Act Stress Test (DFAST) is a forward-...