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AFR Statement: Federal Reserve Stress Tests Stand or Fall on Regulator Assumptions

Submitted by on June 21, 2018 – 4:07 pm
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FOR IMMEDIATE RELEASE

June 21, 2018

CONTACT:

Carter Dougherty   carter@ourfinancialsecurity.org   (202) 251-6700

 AFR Statement on Federal Reserve Stress Tests

“Banks habitually claim that stress test results demonstrate that there is no need for public concern about bank solvency or financial stability,” said Marcus Stanley, policy director, Americans for Financial Reform. “But stress tests are forecasts based on models. They stand or fall on the approach of regulators, whose assumptions can seriously underestimate bank losses. Before the 2008 financial crisis regulatory models also showed Wall Street was safe, but that turned out to be fantasy.”

AFR has been tracking a worrying trend toward watered-down stress tests over the past several years, documented in a 2017 report: “Were the 2017 Stress Tests Less Stressful Than Ever.” We will carefully analyze this year’s stress test results to see if that trend has continued and release our analysis soon.

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