Increased Transparency and Accountability for Federal Reserve Stress Tests.
This law mandates greater transparency from the Federal Reserve (Fed) regarding its oversight of large financial institutions. It requires the Fed to publicly disclose the models and assumptions used to calculate banks' required safety capital and the specific scenarios used in annual stress tests. A key provision prohibits the Fed from using its current authority to subject non-bank financial companies to climate-related stress tests, limiting the scope of regulation. The goal is to enhance financial stability, indirectly protecting citizens' savings.
Key points
The Federal Reserve must disclose the exact formulas and assumptions used to calculate the required safety capital (stress capital buffer) for large banks.
Economic scenarios used in annual bank stress tests must be publicly announced in advance, increasing regulatory predictability.
The law explicitly prohibits the Fed from conducting climate-related stress tests on large non-bank financial companies under existing authority.
The Government Accountability Office (GAO) must conduct regular, independent audits to evaluate the robustness of the Fed's stress tests.
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