In these remarks, I will first sketch out how changes in regulation, risk management, the economy, and overall financial stability have prompted alterations to stress tests over the past decade. Much of that change has enhanced transparency, which is a founding principle for stress tests.
I will then suggest some ways in which the effectiveness of stress testing can be further enhanced with greater transparency. Ten years ago, in May of 2009, the Fed and the Treasury Department released the first stress test results under the Supervisory Capital Assessment Program (SCAP). At that moment, the U.S. economy was in free fall.