Federal Reserve reveals new stress tests for nation’s largest banks

A new test will require the largest banks to prove stability if a counterparty fails.

Large U.S. banks are preparing for more regulation, courtesy of the federal government. This time, though, the governmental actions have nothing to do with preventing another mortgage crisis. Instead, the Federal Reserve wants to know: If another global recession occurs, are large banks prepared to weather the economic crisis?

On Nov. 1, the Federal Reserve released the latest round of “stress tests,” designed to determine whether the banks can handle several hypothetical scenarios put forth by the government. While these tests have been in place since the 2010 passing of the Dodd–Frank Wall Street Reform and Consumer Protection Act, and have been conducted since 2012, the Federal Reserve added one new test for the largest banks this year over concerns they are becoming too reliant on counterparties.

Assistant Editor

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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