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Are BHC and Federal Reserve Stress Test Results Converging? What Do We Learn from 2015?

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Abstract

In March, the Federal Reserve and thirty-one large U.S. bank holding companies (BHCs) announced results of the latest Dodd-Frank Act-mandated stress tests. Some commentators have argued that BHCs, in designing their stress test models, have strong incentives to mimic the Fed’s stress test results, since the Fed’s results are an integral part of the Federal Reserve’s supervisory assessment of capital adequacy for these firms. In this post, we look at the 2015 stress test projections by the eighteen largest U.S. BHCs and by the Fed and compare them to similar numbers from 2013 and 2014. As stress testing becomes more established, do we see evidence that the BHCs are mimicking the Fed?

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  • Beverly Hirtle & Anna Kovner & Eric McKay, 2015. "Are BHC and Federal Reserve Stress Test Results Converging? What Do We Learn from 2015?," Liberty Street Economics 20150406, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87021
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    More about this item

    Keywords

    banks; stress testing; Dodd-Frank Act stress tests; bank holding companies (BHCs);
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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