Fed’s Bowman Says Proposals To Improve Stress Testing For Lenders Coming Soon: Report

Federal Reserve’s Vice Chair for Supervision, Michelle Bowman, reportedly said on Tuesday that she plans to unveil new changes to the central bank’s stress testing process.

According to a Bloomberg report, Bowman added that the U.S. version of the Basel III norms is currently being negotiated with the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency.

“We’ve been in the process of introducing incremental proposals to improve the stress testing process and we’ll be in the next week or so introducing another iteration of that,” she said. Bowman was speaking at the Institute of International Finance’s annual gathering in Washington. 

Her comments come as big lenders kicked off the third-quarter earnings season in the U.S. on Tuesday. JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC), Citigroup Inc. (C), and Goldman Sachs Group Inc. (GS) have announced their latest quarterly results.

Bowman’s remarks come after Treasury Secretary Scott Bessent criticized the Dodd-Frank rules last week, stating that this legislation has left a “trail of destruction” in its wake.

“To be clear, the financial crisis underscored the need for new regulations. The purpose of Dodd-Frank was to end ‘Too Big To Fail,’ but it ended up creating ‘Too Small To Succeed,'” the Treasury Secretary had stated.

Earlier, Fed Governor Michael Barr expressed concerns with the central bank’s deregulation proposal on capital standards, which regulators appointed by President Donald Trump have supported.

“These shifts would not make the system safer; they would leave community banks once again exposed to the fallout if the largest players stumble,” Barr said, noting that the proposed changes threaten protections for small banks.

Meanwhile, U.S. equities were mixed in Tuesday morning’s trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.22%, the Invesco QQQ Trust ETF (QQQ) fell 0.52%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.14%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.06% at the time of writing.

Also See: Jamie Dimon Sees ‘Early Signs’ Of Excess In Corporate Lending Amid Bankruptcies In US Auto Market: Report

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