Stress Tests Touch Off Debate on Disclosure

Going public with Camels ratings could be next step

By Steven Sloan

 

For decades, the details regulators learned about banks through the examination process have been tantamount to state secrets available to a select few. But a line will be crossed next week, when federal regulators are expected to release the results of stress tests regulators have conducted at the nation’s 19 largest banks. That regulators are saying anything at all about financial institutions that are still open could lead to a push for an even brighter spotlight on the industry and its supervisors. Some are already beginning to argue that if regulators can divulge details on how a bank’s capital position might hold up during severely stressed periods, they should also publicize other sensitive data, such as an institution’s Camels rating. “Transparency of other supervisory details in a clear and understandable way would be good,” said Karen Shaw Petrou, the managing director of Federal Financial Analytics Inc. “I’ve been profoundly unpersuaded that the cone of secrecy as used over the years by bank examiners did anything to stabilize the system, as evidenced by the situation today. In fact, had there been more transparency earlier on, the market would have discovered the problems for itself.”

.