WASHINGTON (Reuters) – The Federal Reserve moved on Tuesday to make its stress testing of large banks more transparent, providing financial firms significantly more information about how their portfolios would perform under potential economic shocks.
During the 2019 round of stress tests and going forward, big banks will know “significantly more” information about the models the U.S. central bank uses to test banks’ books, including how hypothetical loans perform under the tests and more detailed information about the Fed’s models.
Tests - Factoring - Jump - Percent - Unemployment
The 2019 tests will include factoring in a jump to 10 percent unemployment from the current 4 percent rate, as well as elevated stress in corporate loan and commercial real estate markets in the most severe scenario.
The transparency changes, first proposed by the Fed in December 2017 and finalized Tuesday, are aimed at long-running bank complaints that the current stress-testing process is cumbersome and opaque.
Addition - Banks - Assets - Banks - Fifth
In addition, less complex banks with assets between $100 billion and $250 billion, such as SunTrust Banks and Fifth Third Bancorp will not have to face the 2019 tests, as the Fed is moving to a two-year cycle for testing those firms.
The industry had been tracking the 2019 testing closely, as Fed officials have said they...
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