Powell says bank stress tests need to keep evolving

Federal Reserve Chairman Jerome Powell the Fed’s annual stress tests of the nation’s largest banks will need to evolve to keep pace with a changing financial system.

Powell calls the tests, which determine whether a bank could survive a severe economic downturn, were one of the “most successful supervisory innovations” achieved in the aftermath of the 2008 financial crisis.

But Powell says that it is important that the tests are adjusted from year to year to “explore even quite unlikely scenarios” to guard against complacency on the part of bank regulators and banks.

Powell’s remarks Tuesday were delivered in a video message at the start of a conference on stress tests being sponsored by the Fed’s Boston regional bank.