Congressman Gregory W. Meeks Co-Sponsors Amendment to Stress Test ResolutionFacilitates the Use of Stress Tests to Provide Better Transparency and Accountability

(WASHINGTON, DC)– Today, Congressman Gregory W. Meeks co-sponsored a Stress Test and Resolution amendment that was passed in the House Financial Services Committee. This amendment requires financial institutions to run stress tests in accordance to standards set by the regulators who have oversight over them, or who will be responsible for the resolution process of the firms, following on a good practice that emerged during the financial crisis, and helped calm extremely panicky markets.

“The uses of stress tests are extremely important because they help regulators and markets more easily understand how management decisions impact financial institutions under certain economic situations. This amendment brings the necessary transparency and accountability that is needed to better serve financial institutions. I am extremely confident that this amendment will strengthen the management of systemic risks by providing the market, regulators and senior management of financial firms with more accurate information to make better informed decisions,” stated Congressman Meeks.

Stress tests complement other available information in allowing investors who may differ in their views of the likelihood of the occurrence of any given scenario to better price risk. Systemic risk regulators can use the results of stress tests to complete a picture of the state and management of a given financial institution.

While stress tests are extremely beneficial they are not by themselves sufficient. The results of stress tests, if they reveal sufficiently worrisome information, should lead to contingency planning, both by the institutions themselves, and the regulators with oversight. This is why this amendment requires that, if a firm is revealed to no longer be adequately capitalized under a given scenario of the stress tests, then the firm must develop an expedited resolution plan for that specific scenario. While that resolution is non-binding, it will help inform the firm’s management, the regulators, and investors of the risks they face if the economic scenario in question were to rise. With this information, regulators, investors, and the firm’s management can begin contingency planning, considering alternative risk management practices that can help redress the risks in question.

Now serving in his sixth full-term, Meeks was elected to the House on February 3, 1998. Representing New York's Sixth Congressional District in the United States House of Representatives, Meeks' district covers all towns of Southeast Queens, Far Rockaway and Howard Beach. He is a member of the House Committee on Financial Services and the Committee on Foreign Affairs. Congressman Meeks is the Chairman of the International Monetary Policy & Trade Subcommittee of the House Financial Services Committee. He is a Member of the Congressional Black Caucus (CBC), New Democrats Coalition and the Democratic Leadership Council (DLC). He serves as the Co-chair of the Malaysia Caucus, Services Caucus, Dialogue Caucus, OAS Caucus and the Middle East Economic Partnership Caucus.