The U.S. Federal Reserve announced it will eliminate the qualitative objection in 2019 bank stress tests for most domestic institutions, marking a shift in regulatory approach. The change follows improved capital planning by major banks since the 2007-09 financial crisis, according to the central bank.
The policy update applies to U.S. subsidiaries of five foreign banks—Deutsche Bank, Credit Suisse, UBS, Barclays, and TD Bank—which will remain subject to the qualitative review. TD Group could be exempt by 2020 if it meets 2019 requirements, while others face continued scrutiny until 2021.
The qualitative objection, introduced in 2010, allowed the Fed to fail banks over operational or risk management issues despite sufficient capital. Under the new framework, such concerns will be addressed through enforcement actions rather than public failure designations.
Reuters reported the development alongside a photo of the Federal Reserve building, dated August 2018, highlighting the ongoing regulatory evolution. The 2019 tests represent the first major revision to the stress-testing process since the global financial crisis, which required banks to demonstrate resilience against severe economic shocks.
