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I continue to be impressed with US banking authorities actions vis-a-vis risk profiles. And this continues some eight years after the start of the financial crisis. The US Federal Reserve Board has just announced stress test results for some 33 large banking firms in the US and report the following: general capital levels continue to be on the rise (banks have raised some $800 billion of capital since 2009) as is the ability to withstand shocks and current capital levels around 12.3% would fall to 8.4% post the stress test incident.
The tests are composed of five tests including three prescribed by the Fed and two articulated by the BHC Board and senior management. However, the outcome of the Comprehensive Capital Analysis and Review tests which have tripped up the odd bank or two, are not due to come till June 29th, so let's see what they say. Criticism of this test say such processes delimit capital and return management by BHC Boards (FT, 2016). So this remains a tricky area. The FT reported NYU Stern professor Schoenholtz suggesting such exercises will continue in a robust fashion presenting BHC management with a challenging trade off between regulatory and market-place demands.
I continue to be impressed with US banking authorities actions vis-a-vis risk profiles. And this continues some eight years after the start of the financial crisis. The US Federal Reserve Board has just announced stress test results for some 33 large banking firms in the US and report the following: general capital levels continue to be on the rise (banks have raised some $800 billion of capital since 2009) as is the ability to withstand shocks and current capital levels around 12.3% would fall to 8.4% post the stress test incident.
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