The Fed’s approach to stress testing of the largest and most systemic financial institutions has evolved since the SCAP, but several key elements persist to this day. 1 These elements include, first, supervisory stress scenarios applicable to all firms; second, defined consequences for firms deemed to be insufficiently capitalized; and third, public disclosure of the results.
The Fed has subsequently conducted five stress test exercises that built on the success of SCAP, while making some important improvements to the stress test processes.