Get to Know the Fed’s Other Stress Test
ByJohn Heltman
WASHINGTON — As the Federal Reserve moves forward with its implementation of the Basel Committee requirements for long-term liquidity, many are questioning why they are necessary in light of the agency’s existing liquidity stress-testing regime. The Comprehensive Liquidity Assessment and Review — not to be confused with its better-known stress test cousin, the Comprehensive Capital Analysis and Review — is an annual examination of the largest banks’ liquidity positions and risk management, and has been in place since 2012. The program subjects each of the largest banks to horizontal qualitative and quantitative analyses to determine whether their liquidity plans are up to snuff. But CLAR is not as well known and certainly not as well understood in the regulatory landscape as CCAR, and part of that is because its inner workings are unknown. “I don’t think that’s ever been made public,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics. “They may have described it publicly, but the conditions, the terms — it’s not like CCAR, where there’s rule after rule after rule.” Instead, CLAR is implemented as part of the enhanced supervision by the Large Institution Supervision Coordinating Committee, or LISCC — a body within the Fed that oversees U.S.-based global systemically important banks, U.S. operations of foreign G-SIBs, and nonbanks designated by the Financial Stability Oversight Council (though to date, only the banks have been subject to CLAR, though the nonbanks are subject to other liquidity supervision).
http://www.americanbanker.com/news/law-regulation/get-to-know-the-feds-other-stress-test-1081243-1.html?zkPrintable=1&nopagination=1
