![]() It would have been prudent for the Fed to update the scenarios, given what they’ve learned about the nature of the recent bank failures, said João Granja, an accounting professor at the University of Chicago Booth School of Business who specializes in banking regulation. The tests weren’t updated to incorporate factors like rising interest rate risk that played a significant role in the demise of the three banks. ![]() The tests, designed to see how well banks perform in a high-stress climate, were developed before the crisis unfolded. “We should remain humble about how risks can arise, and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses.”īarr, who oversaw the Fed’s autopsy report on failed Silicon Valley Bank, previously said he’s working on updating the Fed’s stress-testing models based on the lessons he’s learned from the recent bank failures. “At the same time, this stress test is only one way to measure that strength,” he added. “Today’s results confirm that the banking system remains strong and resilient,” Michael Barr, the Fed’s vice chair for supervision, said in a statement. ![]() Last year’s tests, which included smaller banks that are tested every other year, found that those tested would lose $612 billion and capital ratios would decline by 2.7% to 9.7%. ![]()
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