ICBA: Fed should not weaken stress testing regime

ICBA called on the Federal Reserve to reconsider a proposal that would weaken the stress test regime for the largest banks.

Details: In a letter to the Fed, ICBA said:

• The stress testing regime ensures that the largest banking organizations maintain a sufficient capital buffer to weather a significant downturn.

• The Fed should take a more measured approach that does not codify a rigid process that prizes transparency over effectiveness.

• It appreciates the Fed’s work to reconsider regulatory and supervisory burden, but these efforts should be directed toward the undue burdens imposed on smaller institutions that pose little risk to the banking system.

• Implementing a true short-form call report for the nation’s community banks would be a meaningful way to rightsize compliance burden without substantially increasing systemic risk.

Background: The Fed conducts stress tests to ensure that large banks are sufficiently capitalized even in a severe recession. The Fed last fall requested comment on proposals to enhance the transparency and public accountability of its annual stress test for large banks.