Brainard Says Fed Won't Dictate Where Banks Can Lend

The transcript discusses the role of stress tests in capital planning for large financial institutions, including the consideration of geo-economic risks like Brexit. It outlines supervisory guidance for risk management frameworks, emphasizing that banks should measure, monitor, and manage their material risks without dictating specific sectors for lending. The speaker clarifies that these practices are more relevant for large institutions rather than small ones, which have a smaller footprint. The focus is on ensuring consistent expectations across jurisdictions.

What is the primary focus of stress tests in large financial institutions?

• Determining customer satisfaction

• Evaluating capital planning and geo-economic risks

• Analyzing employee performance

• Assessing climate change impacts

Which of the following is NOT included in the supervisory guidance for large institutions?

• Directing banks on specific sectors to lend to

• Ensuring a robust risk management framework

• Monitoring material risks

• Managing material risks

What is emphasized in the supervisory guidance for large financial institutions?

• Directing investment strategies

• Focusing on small institutions

• Implementing climate stress tests

• Having a good risk management framework

Why are small institutions not the primary focus of the discussed supervisory practices?

• They are already compliant

• They have a larger footprint

• They have a smaller footprint

• They are not involved in capital planning

What do large institutions seek in terms of expectations across jurisdictions?

• Fewer compliance requirements

• Higher profit margins

• More lenient regulations

• Consistent expectations