Fed looking to improve stress tests by including system-wide exercises

10 December 2018 9:58pm
The US Federal Reserve is researching ways to improve stress tests by incorporating the impact of a shock on the financial system as a whole rather than on an individual bank alone, Fed Governor Lael Brainard said.

The United States trails authorities in the euro area, Japan and Switzerland in running system-wide, or “macroprudential,” exercises, a Bank for International Settlements unit said last month.

Brainard said the Fed is experimenting with ways to look at “second-round” waves of a shock that has caused not only direct losses to a bank but also stress to other firms and markets.