Supervisory Stress Testing Models Should Evolve To Capture Emerging Risks: Stanley Fischer

The Federal Reserve’s stress testing models and methodologies have to evolve over time to capture salient emerging risks to financial firms and the system as a whole, notes Stanley Fischer, vice chairman of the U.S. Federal Reserve System.

Fischer underscored the importance of supervisory stress testing during a speech delivered at Riksbank Macroprudential Conference in Stockholm in June of this year.

Fed’s stress testing models built on success of SCAP

Fischer started off his speech by highlighting the importance of stress testing, which has become a cornerstone of a new approach to regulation and supervision of the largest financial institutions in the U.S. He pointed out that the Fed’s first supervisory stress...