The flaws in the Fed's new macro stress test proposals
Stress tests under fire
At the end of 2011, the Federal Reserve published proposals for new enhanced prudential standards and an early remediation requirement.1 These proposals deal with large bank-holding companies and cover stress tests and early remediation requirements, in addition to risk-based capital, leverage requirements, liquidity requirements and single-counterparty credit limits.
The proposals are broadly in accordance with Basel III and the work of the Basel Committee on Banking Supervision on dealing with
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