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Banks Need to Improve Their Approach to Stress Tests 

April 23, 2014
Steve Culp, Forbes

The Dodd-Frank Act (DFA) established the stress tests and Comprehensive Capital Analysis and Review (CCAR) to determine the stability of the banking system.  Since the stress and capital requirements tests were first implemented in 2009, we’ve observed that it has tended to help banks gain a better understanding of their overall risk profiles, better manage risks across lines of business and foster confidence, both among regulators and in the marketplace.

There is little doubt, nearly five years later, that most banks have improved their capital position and their stability along with their profitability.  The key question now is how banks position themselves and execute their business strategy under the new capital structures to drive competitive advantage, improve profitability through innovation and deliver value to the shareholder.

The Federal Reserve, which administers the CCAR process and stress tests, has provided guidelines for banks regarding the uses of excess capital.

Read more: Forbes

 
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