Ryan Tracy
speaker
141 appearances
3 recordings
1 series
first heard Jun 2018
last heard Nov 2018
Ryan Tracy’s voice in public audio — every appearance, attributed to the second.
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Appearances
Also, it reflects the fact that they've done a better job in the Fed's view of improving the way that they manage their risk, of improving the way that they prepare for the worst.
Right.
So what we're looking forward to as the tests move forward is really a change in the form of the grades that the Fed issues every year.
The Fed has used these tests as a stick.
When Citigroup failed in 2014, it was a huge deal for that bank.
The CEO's job was on the line.
And it was a message from the Fed that it was unhappy with the way Citigroup was being run and wanted to see and the pace at which Citigroup was making improvements that the Fed thought the bank needed to make.
The Fed's now at a place where we're not seeing failures like that as often.
And the Fed is kind of feeling like it doesn't need this stick as much as it used to.
So the Fed's rolling out some changes that rather than passing a bank each year or failing a bank each year and having that
headline that grabs the attention of the CEO.
Instead, they're going to release just the numerical results of the test that those results indicate where a bank's capital was.
And that's still going to be very important.
Don't get me wrong, but it's going to be a different world than a bank failing the test.
Yeah, so just getting into the weeds a little bit so people can understand why we see this change coming.
There are two main aspects of the stress test.
There are the quantitative results and the qualitative, more subjective ones.
The quantitative results will show you a bank's capital level was at a certain percentage after going through this tough hypothetical recession.
And the Fed wants to see that the bank's capital levels are at a certain minimum to ensure that they can stay open.
The qualitative results are more subjective.
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