Stress Tests and Policy

15 Pages Posted: 23 Jul 2019

See all articles by Greg Feldberg

Greg Feldberg

Yale University - Yale Program on Financial Stability; Yale School of Management

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: July 22, 2019

Abstract

Ten years after the Federal Reserve’s crisis-era bank stress test, it is time to recalibrate the stress tests for “peacetime.” Outside of a crisis, supervisors should tailor stress tests to focus on their comparative advantages by taking a macroprudential focus, with severe scenarios that enable them to learn about emerging risks in both traditional and shadow banking sectors. In peacetime, also, supervisors should emphasize risk management practices and be wary of forcing rapid changes in capital levels for individual banks, while linking stress-test results with countercyclical capital buffers across the system.

Keywords: stress tests, macroprudential, countercyclical, capital policy

Suggested Citation

Feldberg, Greg and Metrick, Andrew, Stress Tests and Policy (July 22, 2019). Available at SSRN: https://ssrn.com/abstract=3424327 or http://dx.doi.org/10.2139/ssrn.3424327

Greg Feldberg (Contact Author)

Yale University - Yale Program on Financial Stability ( email )

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Yale School of Management ( email )

135 Prospect Street
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Andrew Metrick

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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