Big banks told to improve capital strategy
Aug. 21, 2013 – Big banks were told they must improve the way they determine how much capital they will need in the case of a future financial crisis by the Federal Reserve.
In a paper released Monday, the Fed said banks participating in regular “stress tests” had flaws in their capital planning processes.
Since the financial crisis, stress testing big banks has become a tool for regulators to monitor the health of the financial system. Banks are tested on how well their capital levels would weather a hypothetical market shock.
Eighteen firms were included in Fed stress tests in 2013. The next set of tests will start this fall and will include 12 additional banks with assets at more than $50 billion. Credit unions are exempt from these stress tests.
Federal Reserve statement