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Keywords:stress testing 

Discussion Paper
The CLASS Model: A Top-Down Assessment of the U.S. Banking System

Central banks and bank supervisors have increasingly relied on capital stress testing as a supervisory and macroprudential tool. Stress tests have been used by central banks and supervisors to assess the resilience of individual banking companies to adverse macroeconomic and financial market conditions as a way of gauging additional capital needs at individual firms and as a means of assessing the overall capital strength of the banking system. In this post, we describe a framework for assessing the impact of various macroeconomic scenarios on the capital and performance of the U.S. banking ...
Liberty Street Economics , Paper 20140604

Speech
Economic research and stress testing

Remarks at the Fourth Annual Stress Test Modeling Symposium, Federal Reserve Bank of Boston, Boston, Massachusetts.
Speech , Paper 173

Discussion Paper
Are BHC and Federal Reserve Stress Test Results Converging? What Do We Learn from 2015?

In March, the Federal Reserve and thirty-one large U.S. bank holding companies (BHCs) announced results of the latest Dodd-Frank Act-mandated stress tests. Some commentators have argued that BHCs, in designing their stress test models, have strong incentives to mimic the Fed’s stress test results, since the Fed’s results are an integral part of the Federal Reserve’s supervisory assessment of capital adequacy for these firms. In this post, we look at the 2015 stress test projections by the eighteen largest U.S. BHCs and by the Fed and compare them to similar numbers from 2013 and 2014. ...
Liberty Street Economics , Paper 20150406

Journal Article
Tracking and stress-testing U.S. household leverage

Housing equity is an important component of borrowers? wealth and a critical determinant of their vulnerability to shocks. In this article, the authors use a unique, newly created data set to analyze the evolution of household leverage?defined here as the ratio of housing debt to housing values?over time and across locations in the United States, at the micro level. They find that leverage was at a very low point just prior to the large declines in house prices that began in 2006, and rose very quickly through 2012, in spite of reductions in housing debt. As of early 2017, leverage statistics ...
Economic Policy Review , Issue 24-1 , Pages 35-63

Speech
Structural and cyclical macroprudential objectives in supervisory stress testing: remarks at The Effects of Post-Crisis Banking Reforms, Federal Reserve Bank of New York, New York City

Remarks at The Effects of Post-Crisis Banking Reforms, Federal Reserve Bank of New York, New York City.
Speech , Paper 290

Report
Assessing financial stability: the Capital and Loss Assessment under Stress Scenarios (CLASS) model

The CLASS model is a top-down capital stress testing framework that uses public data, simple econometric models, and auxiliary assumptions to project the effect of macroeconomic scenarios on U.S. banking firms. Through the lens of the model, we find that the total banking system capital shortfall under stressful macroeconomic conditions began to rise four years before the financial crisis, peaking in the fourth quarter of 2008. The capital gap has since fallen sharply, and is now significantly below pre-crisis levels. In the cross section, banking firms estimated to be most sensitive to ...
Staff Reports , Paper 663

Report
Tracking and stress-testing U.S. household leverage

Borrowers? housing equity is an important component of their wealth and a critical determinant of their vulnerability to shocks. In this paper, we create a unique data set that enables us to provide a comprehensive look at the ratio of housing debt to housing values?what we refer to as household leverage?at the micro level. An advantage of our data is that we are able to study the evolution of household leverage over time and locations in the United States. We find that leverage was at a very low point just prior to the large declines in house prices that began in 2006, and rose very quickly ...
Staff Reports , Paper 787

Working Paper
The Impact of Regulatory Stress Tests on Bank Lending and Its Macroeconomic Consequences

We use an expansive regulatory loan-level data set to analyze how the portfolios of the largest US banks have changed in response to the Dodd-Frank Act Stress Test (DFAST) requirements. We find that the portfolios of the largest banks, which are subject to stress-testing, have become more similar to each other since DFAST was implemented in 2011. We also find that banks with poor stress-test results tend to adjust their portfolios in a way that makes them more similar to the portfolios of banks that performed well in the stress-testing. In general, stress-testing has resulted in more ...
Working Papers , Paper 20-12

Report
Climate Stress Testing

Climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment. We develop a stress testing procedure to test the resilience of financial institutions to climate-related risks. Specifically, we introduce a measure called CRISK, systemic climate risk, which is the expected capital shortfall of a financial institution in a climate stress scenario. We use the measure to study the climate-related risk ...
Staff Reports , Paper 977

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