US Banks Share Information With Each Other Ahead of Fed Stress Tests

Executives at the biggest U.S. banks are sharing notes with each other before their next round of tests with federal regulators.

Banks are struggling to figure out what exactly the U.S. Federal Reserve is looking for when it conducts its annual “stress tests,” which measure how banks will hold up during times of economic turmoil, bank executives, former Fed officials and consultants involved in the process told Reuters.

In gatherings organized by industry groups as well as more informal forums, executives say they have swapped tips about everything from how to best communicate their data – regulators evidently appreciate robust summaries — to how to project legal losses in a hypothetical downturn.

The Federal Reserve deliberately keeps quiet about how it measures lenders’ performance during downturns, to prevent banks from finding loopholes in the process that would allow them to take more risk, senior regulators have said publicly. It has given banks a little more information recently, but many executives still gripe about the tests.

“You put something in and one year it’s okay and the next year they say ‘no,’ and you’re scratching your head,” said one bank executive. The executive, like others that spoke to Reuters, spoke about the stress tests on the condition of anonymity.

via Reuters

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