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US banks to put stress tests case to Fed


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The Fed has paved the way for some concessions to the banks’ concerns, setting up a “model validation council” to try to address concerns that the Fed is factoring in too-high loss rates on assets.


One complaint aired by Mr Dimon and other bankers is that the Fed assumes banks would continue to buy back shares in a market crisis. Officials retort that is exactly what they did in 2007.


Officials seem confident that their models delivered sound results. Any changes to the stress tests are likely to revolve around timing, potentially alleviating the pressure on banks to provide so much data at the end of each year. They might also consider giving banks the results of the tests and allowing them to submit a plan for dividends and share buybacks instead of doing both at the same time. That could make it easier for the banks to avoid an embarrassing veto on their capital plans.

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