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US Federal Reserve’s Michelle Bowman says changes to bank stress test coming soon
The overhaul is designed to make the process more transparent and the results more predictable for lenders, addressing long-running complaints from the banking industry about how the exams are conducted.
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Bowman said the changes would “finally close the book on an opaque and unnecessarily unpredictable framework.”
The stress tests were introduced after the 2008 financial crisis and are used by the Fed to determine whether major banks can withstand severe economic conditions. Their results also help set additional capital requirements for lenders, Reuters reported.
Fed to reveal more details behind stress tests
Banks have argued for years that the stress tests are subjective and burdensome. The industry sued the Fed in 2024 over the use of the exams, after which the central bank under Bowman proposed changes in October, Reuters reported.
Under the revamped framework, the Fed plans to disclose substantially more information about the models used to identify potential weaknesses at banks. That would include equations, variables and other technical details that the central bank has traditionally kept confidential.The Fed also plans to provide greater detail about the hypothetical economic scenarios it creates for the annual examinations. Bowman said the additional information would give the public a better understanding of how the testing process works.
Another key change would alter how stress-test results affect banks’ capital requirements.
The Fed plans to average the results from a bank’s two most recent stress tests when determining its “stress capital buffer”. Bowman said the approach would reduce volatility in the amount of capital banks are required to hold from year to year.
The revised process would also allow the public to comment on the testing models.
Bowman targets broader capital-rule changes
Bowman said the Fed also intends to use stress testing to privately alert supervisors to potential weaknesses at individual banks. She noted that banks already conduct multiple internal stress tests and said examiners and lenders should maintain an “open dialogue” about relevant findings.
“I believe there is tremendous value in comparing notes,” she said.
The completion of the stress-test overhaul forms part of Bowman’s broader push to change capital requirements for banks.
She said the Fed expects to finish work by year-end on two other major capital rules. One involves the Basel framework governing risk-based capital, while the other concerns the additional capital charge applied to globally systemic banks.
The Fed expects the changes to the systemic-bank capital requirement to reduce the amount of capital that large banks are required to hold in reserve, Reuters reported.
Taken together, the initiatives would reshape how the Fed approaches capital requirements, with greater disclosure around stress testing and changes to how banks’ capital buffers are determined.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
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1213 ET – Volvo Car is suffering from intense competition in China, but the Swedish carmaker’s chief commercial officer, Erik Severinson, still sees a path for his company to succeed in the world’s largest car market in the long run. Sales of premium cars made by Western companies are under pressure in China, while local players are fighting a price war to drive volumes, Severinson says in an interview. “Right now it is very difficult to compete in that market for everyone,” he says. Volvo is betting that new models with self-driving and infotainment systems, as well as differentiated interior designs, will make its cars more relevant to Chinese consumers, Severinson says. Volvo Car shares close 0.1% higher. (adria.calatayud@wsj.com)
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Generac’s Amazon agreement spotlighted an emerging growth lever as the rapid buildout of data centers offsets sluggish demand for home standby generators. The news also lifted several of Generac stock’s electrical equipment and power management peers on Thursday. Late Wednesday, Generac Holdings disclosed a big, long-term deal to supply backup power generators for Amazon’s data centers. An SEC 8-K filing…
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Prime Minister Anutin Charnvirakul will visit Japan, the U.S., and the U.K. from September 20-27 for diplomatic and investment tasks, including attending the UNGA81 and meeting tech executives.
Key Points
- Prime Minister Anutin Charnvirakul is set to visit Japan, the United States, and the United Kingdom from September 20 to 27 for diplomatic and economic engagements, including the UN General Assembly in New York. He will be accompanied by Deputy Prime Minister Sihasak Phuangketkeow and Digital Economy Minister Chaichanok Chidchob.
- In Japan, Anutin will meet Thai athletes at the 20th Asian Games and lead a Team Thailand meeting. In New York, he will attend the UNGA81 opening, deliver Thailand’s statement, and engage with UN officials and global leaders. Economic discussions in the U.S. will feature an investor roundtable and meetings with major companies like Google.
- The trip will conclude in London, where Anutin will present Thailand’s economy to institutional investors with UBS, and hold discussions with Virgin Atlantic and Rolls-Royce before returning to Thailand on September 27.
Prime Minister Anutin Charnvirakul is scheduled to visit Japan, the United States, and the United Kingdom from September 20 to 27 for diplomatic, economic, and investment engagements, including the 81st Session of the United Nations General Assembly (UNGA81) in New York. Deputy Prime Minister and Foreign Affairs Minister Sihasak Phuangketkeow and Digital Economy and Society Minister Chaichanok Chidchob will also join the mission.
According to Government Spokesperson Ekkapob Pianpises, the prime minister will begin the trip in Japan, meeting Thai athletes competing in the 20th Asian Games and chairing a Team Thailand meeting on September 21. In New York, he will attend the UNGA81 opening and General Debate and deliver Thailand’s statement on September 24, alongside meetings with the UN Secretary-General and leaders from several countries.
Economic engagements in the United States will include an investor roundtable with Bank of America and Jefferies, talks with PIMCO and a dinner hosted by the U.S.-ASEAN Business Council and U.S. Chamber of Commerce. Anutin will also meet senior Google executives, while Chaichanok will discuss cooperation on AI, digital infrastructure, workforce skills, and technology investment with major technology companies.
The delegation will then travel to London, where Anutin and Thai capital-market executives will meet with institutional investors, in cooperation with UBS, to present Thailand’s economy and investment opportunities. Meetings with Virgin Atlantic and Rolls-Royce are also scheduled before the delegation returns to Thailand on September 27.
Source : Thai PM Leads Overseas Mission to Expand Trade and Investment
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