House is calling for greater transparency in US bank
stress tests, arguing that excessive stringency in bank stress
tests can dampen lending to the real economy.
A recent report published by the trade group,
Comparison between United States and European Union Stress
Tests, compares the approach of US and EU banking
Those approaches diverge. The European Banking
Authority’s (EBA) test scenario for the 2016
EU-wide stress tests assumes a moderate recession. In its
report, The Clearing House contrasts this with the Federal
Reserve’s stress test scenario under the Comprehensive
Capital Analysis and Review (CCAR) regime. That entails a
hypothetical recession significantly worse than that associated
with the 2007-2009 financial crisis.
Francisco Covas, The Clearing House
"The design of supervisory stress scenarios in
the US is extremely stringent. US regulation is requiring US
banks to hold even more equity than they already have,"...