On April 18th, the Federal Reserve is advancing the reform of stress testing for large banks and has released a reform proposal for public opinion. According to the proposal, the results of future stress tests will be calculated based on a two-year average. The Federal Reserve announced in a statement on Thursday that it plans to postpone the effective date of the annual stress capital buffer requirement from the current October 1st to January 1st of the following year, in order to give banks more time to adapt to the new capital requirements. The statement also stated that the reform plan will provide targeted optimization and simplification of the data collection process related to stress testing. The Federal Reserve emphasizes that the planned reforms are not intended to have a substantial impact on banks’ capital requirements. However, Michael Barr, a member of the Federal Reserve Board and recently retired Vice Chairman of Regulatory Affairs, stated in another statement that he does not support the reform plan. He pointed out, “These changes may turn stress testing into a rigid formalism, providing a false sense of security to system resilience
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