WASHINGTON — Regulators' stress tests of the nation's largest banks last year were highly successful but are unlikely to become standard practice, a top overseer said Thursday.
Comptroller of the Currency John Dugan said in a speech that the intensive stress tests were "the most significant and successful policy proposal" by the Obama administration to respond to the financial crisis.
"As a result, just one year later, most large U.S. banks have very healthy levels of capital, levels that are high by recent historical standards," Dugan said.
Conducted at the beginning of last year, the stress tests sought to determine the relative health of the largest financial institutions by testing their ability to deal with more adverse market scenarios. Firms found to be lacking were required to raise private capital or take additional government funds.
Despite the success, Dugan said, stress tests are unlikely to become a standard tool for regulators that will be released publicly. Some of the ad hoc decisions made by regulators in designing the original tests make the process too imprecise. He said he was "reluctant" to regularly use the tests as a key part of supervision of national banks.
"Much improvement is needed in these systems--another lesson learned from the tests--but until strides are made, comprehensive stress testing will remain very difficult," Dugan said.