Fed's Quarles defends removing tough target from stress testing

WASHINGTON: The Federal Reserve is overhauling how it manages bank stress tests – the most difficult regulatory hurdle established after the 2008 financial crisis – and the agency’s supervision chief argues that a key limit on a lender’s leverage shouldn’t be part of the exams.

Randal Quarles, the Fed’s vice chairman for supervision, defended the regulator’s plans to remove that element, which has been particularly difficult for firms such as Goldman Sachs Group Inc and Morgan Stanley, telling lawmakers on Wednesday that he doesn’t see the move as weakening regulation.