Macroprudential Supervision of Financial Institutions: Lessons from the SCAP

17 Pages Posted: 30 Nov 2009

See all articles by Beverly Hirtle

Beverly Hirtle

Federal Reserve Bank of New York - Banking Studies Department

Til Schuermann

Oliver Wyman

Kevin J. Stiroh

Federal Reserve Bank of New York

Date Written: November 1, 2009

Abstract

A fundamental conclusion drawn from the recent financial crisis is that the supervision and regulation of financial firms in isolation - a purely microprudential perspective - are not sufficient to maintain financial stability. Rather, a macroprudential perspective, which evaluates and responds to the financial system as a whole, seems necessary, and the ongoing discussions of regulatory reform in the United States underscore this view. The recently concluded Supervisory Capital Assessment Program (SCAP), better known as the bank “stress test,” is one example of how the macro- and microprudential perspectives can be joined to create a stronger supervisory framework that addresses a wider range of supervisory objectives. This paper reviews the key features of the SCAP and discusses how they can be leveraged to improve bank supervision in the future.

Keywords: bank stress test, macroprudential, SCAP, bank supervision

JEL Classification: G21, G28, G20

Suggested Citation

Hirtle, Beverly and Schuermann, Til and Stiroh, Kevin J., Macroprudential Supervision of Financial Institutions: Lessons from the SCAP (November 1, 2009). FRB of New York Staff Report No. 409. Available at SSRN: https://ssrn.com/abstract=1515800 or http://dx.doi.org/10.2139/ssrn.1515800

Beverly Hirtle (Contact Author)

Federal Reserve Bank of New York - Banking Studies Department ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7544 (Phone)
212-720-8363 (Fax)

Til Schuermann

Oliver Wyman ( email )

1166 6th Avenue
New York City, NY
United States

Kevin J. Stiroh

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6633 (Phone)
(212) 720-8363 (Fax)

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