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house Bill H.R. 4293

Should Banks Have to Do One Stress Test Per Year Instead of Two?

Argument in favor

This bill would make common sense changes to the stress testing process banks go through each year, ensuring they’re still prepared to handle financial stress while reducing the number of stress tests.

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04/10/2018
Better regulation over more regulation. I'm not convinced that increasing the frequency of stress tests yields better results (at least not proportional to the opportunity cost.) I'd rather see more comprehensive tests at the same frequency. After all, the point isn't to hamper the banks or punish them (regardless of whether you think they should be punished - that's fair but that's simply not the point of this particular law.) The point is to help them balance growth and social responsibility, and this is merely symbolic progress toward that, if anything.
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Rick 's Opinion
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04/10/2018
The consumer should have regular information available to help protect his or her investments.
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Caren's Opinion
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04/10/2018
Yes, if requirements are thorough enough then banks could go through a stress test once a year. The goal should be that banks and any financial institution are responsible and protective of consumers and to not mishandle money they are responsible for.
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Argument opposed

This bill would make harmful changes to the stress testing process for banks, making it more likely that banks will take excessive risks and undermine the stability of the financial systems.

OlderNWiser's Opinion
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04/08/2018
Every deregulation causes further harm to our economy and devastates all but the -1%. Help!
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Martha's Opinion
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04/10/2018
Given that banks were part of the financial disaster of 2007, I'd rather be more cautious than less. Big banks have already proven that they cannot regulate themselves.
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Michael777's Opinion
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04/09/2018
Please stop deregulating the banks that crashed our economy over a decade ago! How many times do we have to beg our lawmakers to stop trying to repeat history?
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Banking, Housing, and Urban Affairs
  • The house Passed April 11th, 2018
    Roll Call Vote 245 Yea / 174 Nay
      house Committees
      Committee on Financial Services
    IntroducedNovember 7th, 2017

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What is House Bill H.R. 4293?

This bill would aim to improve the stress testing process for financial institutions by requiring them to prepare an annual report instead of two per year. It would also prohibit the Federal Reserve from using its qualitative assessment of an institution’s ability to withstand financial stress as a basis for objecting to that firm’s plan to draw down capital.

The Federal Reserve would be required to issue regulations subject to notice-and-comment for conducting stress tests that set forth economic conditions and methodologies. It would also have to assess the effect of the Fed’s stress testing models and methodologies on financial stability, credit availability, model risks, and investment cycles.

Additionally, the Federal Reserve would also have to issue regulations subject to notice-and-comment for its Comprehensive Capital Analysis and Review (CCAR) program. It would be prohibited from subjecting an institution to its CCAR program more than once every two years and from objecting to a firm’s capital plan based on qualitative deficiencies. Further, the Fed would be required to establish procedures to respond to inquiries from firms subject to the CCAR program.

Impact

Financial institutions; and regulators.

Cost of House Bill H.R. 4293

The CBO estimates that enacting this bill would increase the deficit by $14 million over the 2018-2027 period.

More Information

In-Depth: The House Financial Services Committee explained why Rep. Lee Zeldin (R-NY) introduced this bill in its committee report:

“In an effort to inject badly needed accountability, transparency, and targeted relief into the stress test processes, this legislation introduced by Congressman Zeldin, and amended by Congressman David Scott (D-GA), makes a number of important reforms. H.R. 4293 would overhaul the current regime for stress testing banks and would make the company-run stress test an annual exercise, reduce the number of supervisory scenarios from three to two — the baseline and severely adverse scenario — and extend the Federal Reserve’s regulatory relief from CCAR’s qualitative assessment to all banks.”

Most Democrats opposed this bill in committee, writing:

“One of the most important policy developments following the largest financial crisis since the Great Depression was the enactment of stress testing for our nation’s largest banks. H.R. 4293 would make several harmful changes to the current bank stress test regime, specifically the stress tests required by the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as the Comprehensive Capital Analysis and Review (CCAR) program administered by the Board of Governors of the Federal Reserve System.”

This legislation passed the House Financial Services Committee on a 37-21 vote and has the support of two cosponsors, both of whom are Democrats.


Media:

Summary by Eric Revell

(Photo Credit: utah778 / iStock)

AKA

Stress Test Improvement Act of 2017

Official Title

To reform the Comprehensive Capital Analysis and Review process, the Dodd-Frank Act Stress Test process, and for other purposes.

    Better regulation over more regulation. I'm not convinced that increasing the frequency of stress tests yields better results (at least not proportional to the opportunity cost.) I'd rather see more comprehensive tests at the same frequency. After all, the point isn't to hamper the banks or punish them (regardless of whether you think they should be punished - that's fair but that's simply not the point of this particular law.) The point is to help them balance growth and social responsibility, and this is merely symbolic progress toward that, if anything.
    Like (28)
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    Every deregulation causes further harm to our economy and devastates all but the -1%. Help!
    Like (89)
    Follow
    Share
    Given that banks were part of the financial disaster of 2007, I'd rather be more cautious than less. Big banks have already proven that they cannot regulate themselves.
    Like (72)
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    Share
    Please stop deregulating the banks that crashed our economy over a decade ago! How many times do we have to beg our lawmakers to stop trying to repeat history?
    Like (41)
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    After the last financial fiasco they should be regulated more !
    Like (17)
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    2008 was 10 years ago, we cannot allow history to repeat itself. The irresponsible actions of the banking and finance industry that led up to the 2008 financial crisis ought to be enough of a reminder that they must be regulated.
    Like (11)
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    No way Folks, keep it at twice a year, being checked.
    Like (10)
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    Two is always better than one.
    Like (8)
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    I would like to see them do one a quarter.
    Like (7)
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    Every bank should have 2 or more stress tests. They have proved they cannot & will not regulate themselves so reducing regulations on them is the WRONG THING TO DO.
    Like (6)
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    The consumer should have regular information available to help protect his or her investments.
    Like (5)
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    More attempts to allow banks a freer hand to gamble....nope.
    Like (5)
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    I worked in the banking system and they need to be kept on their toes. One year would be too lax!
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    DO NOT DEREGULATE THE FINANCIAL INDUSTRY!! Are we trying to create another 2008?! Will you not learn from history?!? Stop it already!!!
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    From my reading of this bill, it takes away the ability to run a stress teat on a bank more than once a year, even if needed, Then it prevents them from doing anything meaningful if the bank fails a stress test. How is this in any way shape or form a good thing?
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    Protect the people instead of sucking up to Big Banking!
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    Yet again, we have tried this before and it ended in disaster. The banks cannot be depended to police themselves and short-sighted de-regulation leads to a very brief burst of economic activity, followed by a deep and difficult to manage recession. This has happened under GOP watch on three occasions and must not be allowed again.
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    Banks can collapse in far less time than a year.
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    It probably should be more than two but definitely not less.
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    ANYTHING THAT TAKES AWAY FROM DODD-FRANK ENDANGERS OUR ENTIRE ECONOMY AND THE FINANCIAL WELL-BEING OF OF EVERY SINGLE PERSON IN THE United States! STOP THINKING ABOUT BIG BUSINESS AND THE WEALTHY INSTEAD OF ALL OF US!
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