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Federal Reserve floats simplified capital rules and stress tests

Joe Mont | April 11, 2018

The Federal Reserve Board this week solicited public comment on a proposal intended to simplify its capital rules for large banks, “while preserving strong capital levels that would maintain their ability to lend to households and businesses under stressful conditions.”

The proposal would introduce a “stress capital buffer” which would in part integrate the forward-looking stress test results with the Board's non-stress capital requirements. The result would produce capital requirements for large banking organization that are firm-specific and risk-sensitive.

“Our regulatory measures are most effective when they are as simple and transparent as possible, and this proposal significantly simplifies our capital regime while maintaining its strength,” Vice Chairman for Supervision Randal K. Quarles said in a statement. "It is a good example of how our work can be done more efficiently and effectively, and in a way that bolsters the resiliency of the financial system."...

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