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14 posts on " Bank Capital"

April 06, 2015

Are BHC and Federal Reserve Stress Test Results Converging? What Do We Learn from 2015?



stress-test-results


In March, the Federal Reserve and thirty-one large U.S. bank holding companies (BHCs) announced results of the latest Dodd-Frank Act-mandated stress tests. Some commentators have argued that BHCs, in designing their stress test models, have strong incentives to mimic the Fed’s stress test results, since the Fed’s results are an integral part of the Federal Reserve’s supervisory assessment of capital adequacy for these firms. In this post, we look at the 2015 stress test projections by the eighteen largest U.S. BHCs and by the Fed and compare them to similar numbers from 2013 and 2014. As stress testing becomes more established, do we see evidence that the BHCs are mimicking the Fed?

Continue reading "Are BHC and Federal Reserve Stress Test Results Converging? What Do We Learn from 2015?" »

Posted by Blog Author at 7:00 AM in Bank Capital, Financial Institutions | Permalink | Comments (0)

February 02, 2015

Bank Capital and Risk: Cautionary or Precautionary?



Bank Capital and Risk: Cautionary or Precautionary

Do riskier banks have more capital? Banking companies with more equity capital are better protected against failure, all else equal, because they can absorb more losses before becoming insolvent. As a result, banks with riskier income and assets would hopefully choose to fund themselves with relatively more equity and less debt, giving them a larger equity cushion against potential losses. In this post, we use a top-down stress test model of the U.S. banking system—the Capital and Loss Assessment under Stress Scenarios (CLASS) model—to assess whether banks that are forecast to lose capital in a severe downturn do indeed have more capital, and how the relationship between capital and risk has evolved over time.

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Posted by Blog Author at 7:00 AM in Bank Capital, Financial Institutions | Permalink | Comments (1)

July 23, 2012

Income Evolution at BHCs: How Big BHCs Differ

Adam Copeland

As noted in the introduction to this series, over the past two decades financial intermediation has evolved from a traditional, bank-centered system to one where nonbanks play an increasing role. For my contribution to the series, I document how the sources of bank holding companies’ (BHC) income have evolved. I find that the largest BHCs have changed the most; they’ve shifted their mix of income toward providing new financial services and are earning an increasing share of income outside of their commercial bank subsidiaries. In this post, I summarize my study’s key findings.


Continue reading "Income Evolution at BHCs: How Big BHCs Differ" »

Posted by Blog Author at 7:00 AM in Bank Capital, Financial Institutions | Permalink | Comments (1)

July 02, 2012

CCAR: More than a Stress Test

Beverly Hirtle

The Federal Reserve recently released the results of its latest stress test of large bank holding companies (BHCs). While the stress test results have received a lot of attention, they are just one part of a much larger effort by the Federal Reserve to ensure that these large BHCs have robust processes for determining how much capital they need to maintain access to funding and continue to serve as credit intermediaries, even under stressed conditions. In this post, I describe these larger efforts and the role that the stress test plays in them.

Continue reading "CCAR: More than a Stress Test" »

Posted by Blog Author at 7:00 AM in Bank Capital, Financial Institutions | Permalink | Comments (0)
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