CONTACT: Laura Peavey
(202) 457-8770
lpeavey@fsforum.com
Forum Welcomes Fed Proposals to Improve Transparency and Effectiveness of Stress Tests
Washington, D.C. – Financial Services Forum President and CEO Amanda Eversole issued the following statement in response to the Federal Reserve Board’s proposals to improve the stress testing framework:
“Stress tests are a useful tool that help ensure consumers, businesses, and communities can rely on the strength and resilience of America’s largest banks, even in times of economic turmoil. However, the way these tests have been executed has introduced unnecessary volatility, imposing costs on everyday Americans. Greater transparency is essential to maintaining their credibility and effectiveness. We welcome the Federal Reserve’s proposals to improve the framework and look forward to reviewing and engaging constructively to support a strong and stable financial system.”
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Background
The largest U.S. banks undergo stress tests conducted by the Federal Reserve at least once a year that measure their ability to absorb losses and continue to support the economy during a severe economic downturn. The Federal Reserve has repeatedly determined in its stress tests that the largest U.S. banks have robust levels of capital.
Since 2009, we have significantly enhanced the quality and quantity of our capital—currently maintaining more than $1 trillion of Tier 1 capital. Forum members also served as a source of strength in times of uncertainty, including the pandemic and 2023 regional banking turmoil.
However, limited transparency around how the tests are designed makes it harder for banks to manage risk and affects their lending decisions, meaning access to credit can be directly and negatively impacted.
Greater transparency in the stress test scenario and modeling would promote the mutual goals of regulators and banks to enhance stability across the financial system.
Read more about our work on stress tests here.
The Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.
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