Supervisory Stress Tests

28 Pages Posted: 12 Nov 2014

See all articles by Beverly Hirtle

Beverly Hirtle

Federal Reserve Bank of New York - Banking Studies Department

Andreas Lehnert

Board of Governors of the Federal Reserve

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2014

Abstract

This article describes the background, design choices and particular details of stress tests used as part of an overall supervisory regime; that is, their formal integration into the process of the ongoing prudential supervision of banks and other large financial institutions. We then describe how the U.S. CCAR/DFAST regime is designed and what that means for the macroprudential vs. microprudential nature of the U.S. exercises. We argue routine stress tests have the potential to substantially change the nature of the supervisory process. In addition, we argue that a great deal depends on the philosophy underpinning modeling decisions, which has not received as much attention as scenario design, disclosure or other stress test design choices.

Keywords: stress tests, bank capital

JEL Classification: G21, G01

Suggested Citation

Hirtle, Beverly and Lehnert, Andreas, Supervisory Stress Tests (November 1, 2014). FRB of New York Staff Report No. 696. Available at SSRN: https://ssrn.com/abstract=2521612 or http://dx.doi.org/10.2139/ssrn.2521612

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)

Andreas Lehnert

Board of Governors of the Federal Reserve ( email )

Washington, DC 20551
United States
202-452-3325 (Phone)
202-263-4852 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
183
Abstract Views
887
rank
162,544
PlumX Metrics