Robert Kaplan, the chief of the Federal Reserve Bank of Dallas, has warned against watering down the stress tests on America’s biggest banks, saying it would be hazardous to loosen regulation at a time of soaring asset prices.
The Fed president said he was concerned about risk-taking in certain corners of the financial markets, but he argued that one of the reasons there has not been a broader build-up of dangerous levels of debt was the strong regulatory regime put in place after the crisis.
“While market valuations may be full, I don’t see a build-up yet of excessive debt and one of the reasons is we have had very tough macroprudential policies, particularly on the big banks,” said Mr Kaplan. “Now is not the time to be easing back on, say, annual stress testing for big banks.”