Federal Reserve Board requests comment on package of proposals that would increase the transparency of its stress testing program
The Federal Reserve Board announced a suite of proposals intended to increase the transparency of its stress testing program. One key aspect of the proposals is intended to increase transparency in the modeling used by the Federal Reserve Board to estimate hypothetical losses in its stress testing, including in the Comprehensive Capital Analysis and Review (CCAR). Specifically, the Federal Reserve Board will make available certain information available to the public that has previously not been released: (i) a range of loss rates, estimated using the Federal Reserve Board's models, for loans held by CCAR firms; (ii) portfolios of hypothetical loans with loss rates estimated by the Federal Reserve Board's models; and (iii) more detailed descriptions of the Federal Reserve Board's models, such as certain equations and key variables that influence the results of those models. The Federal Reserve Board is also seeking comments on a proposed “Stress Testing Policy Statement” that would increase transparency around the development, implementation, and validation of models used by the Federal Reserve Board in its CCAR and Dodd-Frank Act Stress Test (DFAST) processes. Finally, the Federal Reserve Board proposed modifications to its framework regarding annual hypothetical economic scenarios. Specifically, the proposal will clarify when the Federal Reserve Board may make changes to certain factors used in the framework, including changes to the unemployment rate and house price index.
View the Federal Reserve press release announcing the proposals.