BIS Review 47/2010  7  funds provided by the Bank to financial institutions is passed on to firms and households – in other words, to what extent the policy has effects on the increase in bank lending. This depends on firms’ and households’ demand for funds and banks’ lending attitude.
The improvements in data and models have increased our ability to distinguish risks within portfolios. Importantly, these supervisory models are evaluated by a special model validation group made up of experts within the Federal Reserve who do not work on the stress tests.