Since its enactment in 2010, the Dodd-Frank Act has ushered in a new regime of reforms aimed at financial institutions in the U.S. Dodd-Frank is designed to implement measures to help prevent a recurrence of the type of financial crisis experienced in 2008. One of the Dodd-Frank measures requires the Federal Reserve to conduct stress tests on banks. These procedures have evolved from the Federal Reserve’s previous supervisory stress test, the Supervisory Capital Assessment Program (SCAP).
More importantly, Dodd-Frank has gone further, requiring the Federal Reserve to stress test non-bank financial institutions that are deemed systemically important by the Financial Stability Oversight Council. These SIFIs (systemically important financial institutions) now include global insurance companies like American International Group, Inc., Prudential Financial Inc., and MetLife Inc.
In a speech in Sweden on Wednesday, Federal Reserve Vice Chairman Stanley Fischer assured the world that the Federal Reserve’s stress test for non-bank SIFIs would implement a new framework and methods to address the distinct risks facing these organizations. Fischer also emphasized that in requiring large financial firms to conduct their own internal stress tests, the Federal Reserve expects firms to determine the risks inherent to their businesses and risk appetite. According to Vice Chairman Fischer, “We . . . value different approaches for designing scenarios and conducting stress tests.”
S.P. Slaughter
Follow me on Twitter: @SP_Slaughter
More importantly, Dodd-Frank has gone further, requiring the Federal Reserve to stress test non-bank financial institutions that are deemed systemically important by the Financial Stability Oversight Council. These SIFIs (systemically important financial institutions) now include global insurance companies like American International Group, Inc., Prudential Financial Inc., and MetLife Inc.
In a speech in Sweden on Wednesday, Federal Reserve Vice Chairman Stanley Fischer assured the world that the Federal Reserve’s stress test for non-bank SIFIs would implement a new framework and methods to address the distinct risks facing these organizations. Fischer also emphasized that in requiring large financial firms to conduct their own internal stress tests, the Federal Reserve expects firms to determine the risks inherent to their businesses and risk appetite. According to Vice Chairman Fischer, “We . . . value different approaches for designing scenarios and conducting stress tests.”
S.P. Slaughter
Follow me on Twitter: @SP_Slaughter
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