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Author: Board of Governors of the Federal Reserve System
Publisher: CreateSpace
ISBN: 9781508768203
Category : Political Science
Languages : en
Pages : 148
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Book Description
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the Fed-eral Reserve to conduct an annual stress test of BHCs with $50 billion or more in total consolidated assets and all nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) for Federal Reserve supervision. The Board adopted rules implementing this requirement in October 2012. For this year's stress test cycle (DFAST 2015), the Federal Reserve conducted supervisory stress tests of 31 BHCs. This report provides background on Dodd-Frank Act stress testing; details of the adverse and severely adverse supervisory scenarios used in DFAST 2015; an overview of the analytical framework and methods used to generate the Federal Reserve's projections, highlighting notable changes from last year's program; and the results of the supervisory stress tests under adverse and severely adverse scenarios for the BHCs that participated in the DFAST 2015 pro-gram, presented both in the aggregate and for individual institutions. The adverse and severely adverse supervisory scenarios used in DFAST 2015 feature U.S. and global recessions. In particular, the severely adverse scenario is characterized by a substantial global weakening in economic activity, including a severe recession in the United States, large reductions in asset prices, significant widening of corporate bond spreads, and a sharp increase in equity market volatility. The adverse scenario is characterized by a global weakening in economic activity and an increase in U.S. inflationary pressures that, overall, result in a rapid increase in both short- and long-term U.S. Treasury rates. In conducting its supervisory stress tests, the Federal Reserve calculated its projections of a BHC's balance sheet, risk-weighted assets (RWAs), net income, and resulting regulatory capital ratios under these scenarios using data provided by the BHCs and a set of models developed or selected by the Federal Reserve. As compared to DFAST 2014, the Federal Reserve enhanced some of the supervisory models to incorporate more detailed data. These changes are high-lighted in box 1. Specific descriptions of the supervisory models and related assumptions can be found in appendix B. The results of the DFAST 2015 projections suggest that, in the aggregate, the 31 BHCs would experience substantial losses under both the adverse and the severely adverse scenarios.
Author: Board of Governors of the Federal Reserve System
Publisher: CreateSpace
ISBN: 9781508768203
Category : Political Science
Languages : en
Pages : 148
Get Book Here
Book Description
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the Fed-eral Reserve to conduct an annual stress test of BHCs with $50 billion or more in total consolidated assets and all nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) for Federal Reserve supervision. The Board adopted rules implementing this requirement in October 2012. For this year's stress test cycle (DFAST 2015), the Federal Reserve conducted supervisory stress tests of 31 BHCs. This report provides background on Dodd-Frank Act stress testing; details of the adverse and severely adverse supervisory scenarios used in DFAST 2015; an overview of the analytical framework and methods used to generate the Federal Reserve's projections, highlighting notable changes from last year's program; and the results of the supervisory stress tests under adverse and severely adverse scenarios for the BHCs that participated in the DFAST 2015 pro-gram, presented both in the aggregate and for individual institutions. The adverse and severely adverse supervisory scenarios used in DFAST 2015 feature U.S. and global recessions. In particular, the severely adverse scenario is characterized by a substantial global weakening in economic activity, including a severe recession in the United States, large reductions in asset prices, significant widening of corporate bond spreads, and a sharp increase in equity market volatility. The adverse scenario is characterized by a global weakening in economic activity and an increase in U.S. inflationary pressures that, overall, result in a rapid increase in both short- and long-term U.S. Treasury rates. In conducting its supervisory stress tests, the Federal Reserve calculated its projections of a BHC's balance sheet, risk-weighted assets (RWAs), net income, and resulting regulatory capital ratios under these scenarios using data provided by the BHCs and a set of models developed or selected by the Federal Reserve. As compared to DFAST 2014, the Federal Reserve enhanced some of the supervisory models to incorporate more detailed data. These changes are high-lighted in box 1. Specific descriptions of the supervisory models and related assumptions can be found in appendix B. The results of the DFAST 2015 projections suggest that, in the aggregate, the 31 BHCs would experience substantial losses under both the adverse and the severely adverse scenarios.
Author: Ms.Li L. Ong
Publisher: International Monetary Fund
ISBN: 1475527063
Category : Business & Economics
Languages : en
Pages : 64
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Book Description
Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs.
Author: Morris Goldstein
Publisher: Columbia University Press
ISBN: 0881327069
Category : Business & Economics
Languages : en
Pages : 369
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Book Description
Spurred by the success of the first stress test of US banks toward the end of the global economic crisis in 2009, stress testing of large financial institutions has become the cornerstone of banking supervision worldwide. The aim of the tests is to determine which banks are adequately capitalized under severe economic shocks and to order corrective measures for those that are vulnerable. In Banking’s Final Exam, one of the world’s leading experts on banking regulation concludes that the tests administered on both sides of the Atlantic suffer from fundamental weaknesses, leading to a false sense of reassurance about the safety and soundness of the banking system. Some weaknesses can be corrected within the existing bank-capital regime, but others will require bold reforms—including higher minimum capital requirements for the largest and most systemically-important banks. The banking industry is likely to resist these reforms, but this book explains why their objections do not hold water.
Author: Ron Anderson
Publisher: International Monetary Fund
ISBN: 1484376382
Category : Business & Economics
Languages : en
Pages : 79
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Book Description
Macroprudential stress testing (MaPST) is becoming firmly embedded in the post-crisis policy-frameworks of financial-sectors around the world. MaPSTs can offer quantitative, forward-looking assessments of the resilience of financial systems as a whole, to particularly adverse shocks. Therefore, they are well suited to support the surveillance of macrofinancial vulnerabilities and to inform the use of macroprudential policy-instruments. This report summarizes the findings of a joint-research effort by MCM and the Systemic-Risk-Centre, which aimed at (i) presenting state-of-the-art approaches on MaPST, including modeling and implementation-challenges; (ii) providing a roadmap for future-research, and; (iii) discussing the potential uses of MaPST to support policy.
Author: Felix I. Lessambo
Publisher: Springer Nature
ISBN: 3030347923
Category : Business & Economics
Languages : en
Pages : 328
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Book Description
The U.S. banking system differs from many countries both in the range of services supplied and the complexity of operations. Meanwhile, the U.S. financial markets have become the attraction of worldwide investors. This book explains the three key aspects of the industry: the laws governing the banking institutions, the regulations thereof, and their economics and financial statements in a manner not covered by any competitive publications, of interest to both professionals and scholars who want to better grasp this industry. Auditing a bank and/or liquidating a bank require a set of rules not always well understood. The book provides such an overview.
Author: Perry Mehrling
Publisher: Princeton University Press
ISBN: 1400836263
Category : Business & Economics
Languages : en
Pages : 189
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Book Description
How the U.S. Federal Reserve began actively intervening in markets Walter Bagehot's Lombard Street, published in 1873 in the wake of a devastating London bank collapse, explained in clear and straightforward terms why central banks must serve as the lender of last resort to ensure liquidity in a faltering credit system. Bagehot's book set down the principles that helped define the role of modern central banks, particularly in times of crisis—but the recent global financial meltdown has posed unforeseen challenges. The New Lombard Street lays out the innovative principles needed to address the instability of today's markets and to rebuild our financial system. Revealing how we arrived at the current crisis, Perry Mehrling traces the evolution of ideas and institutions in the American banking system since the establishment of the Federal Reserve in 1913. He explains how the Fed took classic central banking wisdom from Britain and Europe and adapted it to America's unique and considerably more volatile financial conditions. Mehrling demonstrates how the Fed increasingly found itself serving as the dealer of last resort to ensure the liquidity of securities markets—most dramatically amid the recent financial crisis. Now, as fallout from the crisis forces the Fed to adapt in unprecedented ways, new principles are needed to guide it. In The New Lombard Street, Mehrling persuasively argues for a return to the classic central bankers' "money view," which looks to the money market to assess risk and restore faith in our financial system.
Author: Mr.Matthew T Jones
Publisher: International Monetary Fund
ISBN: 9781589064027
Category : Business & Economics
Languages : en
Pages : 18
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Book Description
Stress testing is becoming a widely used tool to assess potential vulnerabilities in a financial system. This booklet is intended to answer some of the basic questions that may arise as part of the process of stress testing. The pamphlet begins with a discussion of stress testing in a financial system context, highlighting some of the differences between stress tests of systems and of individual portfolios. The booklet provides an overview of the process itself, from identifying vulnerabilities, to constructing scenarios, to interpreting the results. The experience of the IMF in conducting stress testing as part of the Financial Sector Assessment Program (FSAP) is also discussed.
Author: United States. Congress
Publisher:
ISBN:
Category : Law
Languages : en
Pages : 1414
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Book Description
The Congressional Record is the official record of the proceedings and debates of the United States Congress. It is published daily when Congress is in session. The Congressional Record began publication in 1873. Debates for sessions prior to 1873 are recorded in The Debates and Proceedings in the Congress of the United States (1789-1824), the Register of Debates in Congress (1824-1837), and the Congressional Globe (1833-1873)
Author: Esa Jokivuolle
Publisher: Cambridge University Press
ISBN: 1107185599
Category : Business & Economics
Languages : en
Pages : 205
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Book Description
This book uses perspectives of finance and banking to offer predictions on future financial crises, and how we can prepare for them.
Author: Mr.Dimitri G. Demekas
Publisher: International Monetary Fund
ISBN: 1513501534
Category : Business & Economics
Languages : en
Pages : 34
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Book Description
Giving stress tests a macroprudential perspective requires (i) incorporating general equilibrium dimensions, so that the outcome of the test depends not only on the size of the shock and the buffers of individual institutions but also on their behavioral responses and their interactions with each other and with other economic agents; and (ii) focusing on the resilience of the system as a whole. Progress has been made toward the first goal: several models are now available that attempt to integrate solvency, liquidity, and other sources of risk and to capture some behavioral responses and feedback effects. But building models that measure correctly systemic risk and the contribution of individual institutions to it while, at the same time, relating the results to the established regulatory framework has proved more difficult. Looking forward, making macroprudential stress tests more effective would entail using a variety of analytical approaches and scenarios, integrating non-bank financial entities, and exploring the use of agent-based models. As well, macroprudential stress tests should not be used in isolation but be treated as complements to other tools and—crucially—be combined with microprudential perspectives.
