The recommendations are in large part favorable to the major U.S. banks, with the largest banks expected to gain the most if the changes are implemented. As we pointed out in a recent article, the largest banks have already built a sizable buffer over the target capital ratio figures they need to achieve by 2019. Clearly, a dilution in the Volcker Rule will benefit the largest banks the most. At the same time, it seems that the proposed changes reduce the overall importance of the stress tests in the banks’ capital planning process. Do away with mid-year stress tests and make annual stress tests simpler: This makes the stress tests easier to implement, with just the base case scenario and the severely adverse scenario forecast in each cycle.

Source: Forbes June 13, 2017 16:30 UTC