MRV Associates' Rodriguez Valladares on the Fed's Bank Stress Test

The video discusses the Federal Reserve's cautious approach to bank payouts post-pandemic, emphasizing the importance of stress tests. However, these tests lack transparency and fail to address critical risks like cybersecurity and climate change. The Archegos incident highlights the interconnectedness of banks and non-banks, underscoring the need to include non-bank risks in stress tests. Banks are encouraged to proactively incorporate these risks into their models, guided by Basel 3 regulations, to ensure stability and protect depositors.

What lessons can be learned from the Archegos event regarding bank interconnections?

How should banks approach risk assessment in light of the Fed's current guidelines?