Fed Gives Banks New Set of Dire Scenarios for 2014 Stress Tests
By Craig Torres and Joshua Zumbrun
Lenders including JPMorgan Chase & Co. and Citigroup Inc. will have to show they can survive the demise of a trading partner or a plunge in value of high-risk business loans in the 2014 version of U.S. stress tests. The scenarios for the annual tests, outlined by the Federal Reserve in a statement yesterday, reflect some of the most pressing threats seen by regulators as they gauge the ability of the U.S. financial system to withstand economic shocks. Bankers will have to show what would happen to the value of leveraged loans they hold, the impact of another housing bust and how they’d fare if a firm that owes them substantial sums collapses. Counterparty credit risk “has been a very big concern since the crisis,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc., a Washington regulatory research firm whose clients include the world’s largest banks. “This is an intervening supervisory step while the broader rules are pending.”
http://www.businessweek.com/news/2013-11-02/fed-gives-banks-new-set-of-dire-scenarios-for-2014-stress-tests
