July 9, 2019 / 6:04 PM / 2 months ago

Fed's Quarles vows more transparency around stress tests to come

BOSTON, July 9 (Reuters) - Federal Reserve Vice Chair Randal Quarles said Tuesday the Fed will continue to give banks more information about its annual stress tests, and will push ahead with a plan to create a simpler capital buffer for banks.

In prepared remarks, Quarles said the Fed is preparing to shed further light on the models it uses to test banks and the scenarios it concocts to test their books against hypothetical economic downturns during each year’s tests.

And in the “near future,” Quarles said he anticipates the Fed will move forward in its effort to create a “stress capital buffer,” which would reduce the number of capital requirements imposed on banks.

That idea, first proposed in April 2018, is an effort to make the stress testing regime fall more in line with the Fed’s traditional supervisory work, and make its requirements more flexible to address each firm’s specific characteristics. Quarles said in November the Fed was reconsidering certain parts of that proposal, after banks complained it was too restrictive.

Meanwhile, the Fed will continue to give banks more information about the models it uses to conduct the stress tests until it has made public information about all of its models. (Reporting by Pete Schroeder Editing by Chizu Nomiyama)

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