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
They deal with things like, you know, did the bank's board of directors do a good job questioning management to make sure that the managers of the bank are taking into account the risks that they face?
They deal with things like internal data.
Is the bank able to quickly calculate its exposure to, say, a firm like Lehman Brothers in a couple minutes?
The Fed thinks the bank should be able to do that because if Lehman was in trouble, the bank needs to know how much money it was going to lose.
So, and a lot of banks weren't able to do that in 2008.
So the qualitative part of the test is the one that's going to go private.
That's the one that the Fed has decided, you know what, we don't need to fail a bank based purely on these qualitative reasons.
We think the banks are doing a better job.
And so we're going to take that away from the test.
The Fed hasn't formally proposed that, but they've made it very clear that's going to happen over the next couple of years.
And on the quantitative side, the Fed has proposed that it would no longer fail banks for
purely for going below a certain capital level.
Instead, what they would do is tell the bank, you know what, you're going to need to raise more capital over the next year.
And that's going to be important for banks.
That's going to affect the dividends they pay to their shareholders.
That's going to affect the buybacks that they are able to do in terms of returning profits to shareholders that way.
So that's going to be really important.
And the stress sets are still going to matter.
But this kind of pass-fail conversation is
is going to be replaced with a number.
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