Stress-test day
Ben Bernanke, chairman of the US Federal Reserve, has said the stress tests carried out in the US to assess the financial condition of 19 US banks — whose results are expected to be out on Thursday — were comprehensive and extraordinarily detailed to ensure that banks with markedly different debt issues were all judged on a fair scale.
“The stress tests are comprehensive, rigorous, forward-looking,” the chairman said. “The aspects of these tests can be used to improve the supervisory process,” he added.
The Fed, he said, is requiring banks to identify unintended consequences of new financial instruments, he said, adding that the Fed had stepped up efforts to work with banks to identify risks. “However, the current law still hampers effective bank supervision,” Bernanke said.
The Fed would now be a more forceful regulator, Bernake said, calling upon the US Congress to equip it with the necessary tools to monitor bank safety and soundness.
Bernanke also called upon banks to set compensation to minimize risks. Bank capital, he said, should be built up in good times to be available in bad times. “We must ensure that bank capital is held at high levels during rapid growth,” he said.source:moneycontrol.com
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