has contributed to the improvement in the overall economy. the use of supervisory stress tests – a practice now codified in statute – has helped foster these gains. methodologically, stress tests are forward looking and focus on unlikely but plausible risks, as opposed to “ normal ” risks. consequently, they complement more conventional capital and leverage ratios. the disclosure of the results of supervisory stress tests, coupled with firms ’ disclosures of their own stress test results, provide market participants deeper insight not only into the financial strength of each bank but also into the quality of its risk management and capital planning. stress testing is also proving highly complementary to supervisors ’ monitoring and analysis of potential systemic risks. we will continue to make refinements to our implementation of stress testing and our ccar process as we learn from experience. as i have noted, one of the most important aspects of regular stress testing is that it forces banks ( and their supervisors ) to develop the capacity to quickly and accurately assess the enterprise - wide exposures of their institutions to diverse risks, and to use that information routinely to help ensure that they maintain adequate capital and liquidity. the development and ongoing refinement of that risk - management capacity is itself critical for protecting individual banks and the banking system, upon which the health of our economy depends. bis central bankers ’ speeches

insurance under the federal deposit insurance corporation ( fdic ) ; and the fdic guaranteed banks ’ issuance of longterm debt. and, as i noted, the scap helped to increase confidence in the banking system and restore banks ’ access to private capital markets. ten of the 19 large bank holding companies that underwent the scap were required to raise equity capital – by $ 75 billion in total. today the economy is significantly stronger than it was four years ago, although conditions are clearly still far from where we would all like them to be. because bank credit for households and businesses is critical to continued economic expansion, it is positive for the recovery that banks are also notably stronger than they were a few years ago. for example, premiums on bank credit default swaps have fallen by more than half of their 2009 levels, and other measures of bank risk have also declined substantially. more than 90 percent of the public capital injections that were used to stabilize the banking system have been repaid, and the federal reserve ’ s extraordinary liquidity programs and the fdic ’ s temporary guarantees for uninsured business deposits and bond issues have largely been wound down. the results of the most recent stress tests and capital planning evaluations continue to reflect improvement in banks ’ condition. for example, projected aggregate loan losses under this year ’ s most stressful scenario ( the so - called severely adverse scenario ) were 7 percent lower than the comparable figure last year, in part because the riskiness of banks ’ portfolios continues to decline. the comparison of today ’ s bank capital levels with those at the time of the scap is particularly striking. over the past four years, the aggregate tier 1 common equity ratio of the 18 firms that underwent the recent tests has more than doubled, from 5. 6 percent of risk - weighted assets at the end of 2008 to 11. 3 percent at the end of 2012 – in absolute terms, a net gain of nearly $ 400 billion in tier 1 common equity, to almost $ 800 billion at the end of 2012. indeed, even under the severely adverse scenario of the latest stress test, the estimate of these firms ’ post - stress tier 1 common capital ratio is more see board of governors of the federal reserve system ( 2013 ), “ federal reserve releases summary results of bank stress tests, ” press release, march 7 ; and board of governors of the federal reserve system ( 2013 ), “ federal reserve announces results of comprehensive capital analysis and review ( ccar ),