BIS Report: Stress Tests Set Suboptimal Capital Criteria
A new BIS paper finds that using stress tests to specify regulatory capital is an uncertain and even risky way to differentiate banks. Indeed, the higher the regulatory capital demanded by a stress test, the more likely banks are to become riskier unless a stress test is extremely accurate (unlikely, according to this study).
Warren Presses SEC for Crypto Action
Continuing her push for greater crypto regulation (see Client Report CBDC5), Sen. Warren (D-MA) today wrote to SEC Chair Gensler inquiring if Congress needs to give the SEC authority to regulate crypto exchanges.