Fed 'critical of US banks' risk models'

1 May 2012

Fed 'critical of US banks' risk models'
Daniel Tarullo - Member of the Board of Governors, United States Federal Reserve

Several major banks across the US have faced criticism during their Federal Reserve stress tests, it has been said.

Sources with knowledge of the situation have told Bloomberg that some of the 19 largest financiers that underwent examinations by the Fed were questioned about the way in which they had planned their dividends and calculated losses.

This feedback was issued to the lenders in question in written form from the Fed this week and these documents also included disapproval regarding several other aspects of their business.

For instance, the Fed - which is chaired by Ben Bernanke - cited flaws such as the wrongful setting of housing prices at the same rate, despite the actual need for regional differences.

Last month, Daniel Tarullo, the governor in charge of supervision at the Fed, commented: "A 20 per cent decline in national house prices would mean that prices would decline substantially more in some markets and less in others."

By Gary Cooper

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