Fed Finalizes Overhaul of Bank Stress Test Process

The Federal Reserve is set to finalize an overhaul of its bank stress test process, making it more transparent and predictable for lenders.

Fed Vice Chair for Supervision Michelle Bowman announced that the central bank will vote on a final version of the revamped exam in the coming weeks. The new process will provide more details on the models used by the Fed to probe banks for weaknesses, including various equations, variables, and technical details previously kept secret.

The overhaul aims to address long-standing complaints from banks that the stress tests are subjective and onerous. Bowman said the changes will allow the public a greater understanding of the testing process and will provide more stability in capital requirements.