I think the real issue with regulators is not what tests they are or aren't looking at it's the overall perspective. We just received the OCC's 5 year strategic plan and right in the plan the #1 goal is to create diversity equity and inclusion in their ranks. In the eastern district of Oklahoma we have one OCC regulator that is qualified to sign a national bank exam report. The rest have retired or left the OCC. Hiring competent examiners, who can use common sense application to an exam and discuss with senior management is the key of keeping banks sound, not various levels of testing that don't apply to each and every situation.
First Texoma National Bank
The neighborhood bank you can count on
Art Stauffer, President
Chief Executive Officer
NMLS #703820
220 W. Main
Durant, Oklahoma 74702
www.ftnb.net
580/924-4242
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Original Message:
Sent: 4/10/2023 7:02:00 PM
From: Rob Blackwell
Subject: Tuesday Topic: Plugging Holes in Stress Tests
The failures of Silicon Valley Bank and Signature Bank have sparked renewed discussion around stress tests-and whether they work as well as regulators suggest. Neither of the two banks were subject to the stress-testing requirements for midsize banks after the Federal Reserve changed its rules in 2018. But would it have mattered if they had been under that requirement? That depends on who you ask.
Democrats, led by Sen. Elizabeth Warren, D-Mass., argue the stress testing could have spotted problems earlier, but Republicans and others note that the stress tests didn't look at the liquidity risks posed by rapidly rising interest rates. The stress tests also didn't look at items like deposit concentration within a particular industry.
At the very least, it seems like there's room to improve stress tests, including the internal ones conducted by banks. This article from Bank Director suggests additional factors to consider, why it's important to plan for worst-case scenarios, and how to use outcomes of stress tests to foster deeper conversations about risk management.
Have you recently made changes to your stress tests? Are you planning to? Anything in particular you're focusing on?
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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