Fed’s Barr Offers Alternative Reforms to Big-Bank Stress Test

Setting bank capital levels should be separated from stress test results and customized more closely to a lender’s condition, according to Fed Governor Michael Barr, who is looking for ways to preserve the rigor of the tests amid calls from the industry to make them easier.

Barr, in remarks at the Peterson Institute for International Economics Thursday, objected to making stress tests more transparent ahead of time and tying them to formulaic capital requirements. The outcome could leave capital levels “less tailored than they currently are, and less reflective of the unique business models, exposures, and risk profiles of ...