Stress Testing Accountability and Transparency Act
Summary
H.R. 5270, the "Stress Testing Accountability and Transparency Act," aims to increase the transparency and accountability of the Federal Reserve's stress testing procedures for financial institutions. The bill mandates the Federal Reserve to issue rules regarding the methodologies and scenarios used in stress testing and prohibits climate-related stress tests for nonbank financial companies. It also requires the Government Accountability Office (GAO) to conduct regular studies and report to Congress on the effectiveness of these stress tests.
Expected Effects
The bill will likely lead to more predictable and transparent stress testing processes for banks. It may also reduce the scope of stress tests by preventing climate-related assessments for non-bank entities. The GAO reports will provide Congress with oversight on the effectiveness of the stress tests.
Potential Benefits
- Increased transparency in stress testing methodologies.
- Prevents potential overreach by limiting climate-related stress tests for non-bank financial companies.
- Regular GAO reports to Congress will enhance oversight and accountability.
- Ensures no double-counting of capital requirements, potentially reducing burden on financial institutions.
- May lead to more accurate and reliable assessments of financial stability.
Potential Disadvantages
- Reduced flexibility for the Federal Reserve to adapt stress tests to emerging risks.
- Prohibition of climate-related stress tests for non-banks may limit understanding of climate-related financial risks.
- Increased regulatory burden on the Federal Reserve to issue and update rules.
- Potential for political influence on the GAO reports.
- The 90-day timeframe for issuing rules may be too short for thorough consideration.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with Congress's power to oversee the financial system and regulate commerce, as granted by Article I, Section 8 of the Constitution. The requirement for GAO reports supports Congress's oversight responsibilities. The bill does not appear to infringe on any specific constitutional rights or limitations.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).