Fed stress testing framework to be examined during July public research conference

A public research conference slated for July 9 will examine the transparency and effectiveness of the Federal Reserve Board’s stress testing framework and how stress tests can remain “a dynamic and useful tool of large bank supervision,” the Fed said in a release Monday.

The Fed says the research conference, “Stress Testing: A Discussion and Review,” will be held at the Federal Reserve Bank of Boston and bring together academics, regulators, bankers, and other stakeholders.

“This outreach effort will help the public better understand how stress tests work and will help us learn how we can improve and refine the program,” Vice Chairman for Supervision Randal K. Quarles said in a statement. “A transparent and robust dialogue will benefit all stakeholders of the stress testing regime.”

The Fed Board’s stress tests are in their ninth year and are “a critical component of the Board’s supervision of the largest institutions by providing an independent assessment of the capital adequacy of the firms,” the Fed noted. “Strong capital levels act as a cushion to absorb losses, and the largest U.S. firms have substantially increased their capital since the first round of stress tests in 2009 – more than doubling their capital levels to approximately $1.2 trillion.”

The Fed announcement says additional information, including an agenda and panelists, “will be forthcoming.”

Federal Reserve Board will host public research conference on its stress testing framework in July