Fed Seeking Feedback on Stress Testing of SIFIs

The Federal Reserve is pursuing improvements to the stress testing process of systemically important banks, Fed Vice Chairman Stanley Fischer said today in a speech at a conference in Stockholm. In addition asking for feedback from financial institutions, the Fed asked market analysts and academics to come forward with suggestions on “how to overhaul the process,” Fischer said.

“Supervisory stress testing is not a static exercise and must adapt to a changing economic and financial environment and must incorporate innovations in modeling technology,” Fischer said. “Work is currently underway on adapting the stress testing framework to accommodate firms that have not traditionally been subject to these tests.”

Stress testing — which Fischer called “a cornerstone of a new approach to regulation and supervision of the largest financial institutions in the United States” — will also be evaluated to adopt more “appropriate” processes for nonbank SIFIs, he added.