Fed Points out Bank Weaknesses

Paper released today reports on stress tests at the 18 largest banks—all continue to face challenges in one or more areas of risk management and capital planning.

Five years after one of the most costly financial crises in U.S. history, the 18 largest banks still fall short in at least one of five areas critical to risk management and capital planning, the Federal Reserve said.

While many banking companies have improved capital planning techniques and raised capital levels, “there is still considerable room for advancement across a number of dimensions,” central bank supervisors said in a 41-page paper released today in Washington outlining weaknesses and successes in recent stress tests. The Fed didn’t cite any banks by name.

Risk Identification

The Fed criticized “capital policies that did not clearly articulate” a banking company’s goals and targets and “did not provide analytical support for how these goals and targets were determined to be appropriate.” It also found examples of “less-than-robust governance or controls around the capital planning process, including around fundamental risk-identification.”

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