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2025-10-25 02:58:13
[The Federal Reserve plans to reform the stress testing mechanism to improve transparency and optimize model design] A document released on Friday showed that the Federal Reserve is considering implementing a new plan under which Wall Street banks may be able to learn about stress testing standards in advance, aiming to improve the design of some models, covering credit losses, operational risks, and securities assets. Other adjustments include soliciting industry opinions on "severe adverse scenarios" in the next stress test before the test. The document contains the 2026 version of the test standards, the most severe of which requires banks to assess their performance in a global economic recession, with scenarios such as plummeting stock and real estate prices and a double-digit unemployment rate in the United States. Michelle Bowman, the Federal Reserve's vice chairman for supervision, said she hopes to formally adopt these changes before the 2026 test after public consultation. The agency is scheduled to vote on whether to formally propose these measures at a meeting in Washington later on Friday.
