that has evolved most significantly since the scap. supervisory stress test results are now based on models developed by supervisors that rely on detailed firm - specific data filed through regulatory reports, so the results now represent a fully distinct and independent supervisory view. 4 and, as described above, banks are required to generate their own stress test estimates. public disclosure of both sets of results based on the common supervisory scenarios has provided diverse perspectives on banks ’ capital vulnerabilities. diverse perspectives, especially those from outside the banking industry and supervisory community, continue to be critical in supporting stress testing ’ s macroprudential objectives. academic economists can play an especially important role in helping to foster innovation and creativity by advancing thinking on stress test scenario design and on modeling techniques that better capture the impact of the external environment on bank financial condition. a particularly ripe area for fresh thought, in my view, concerns modeling revenues and non - credit expenses — so - called pre - provision net revenue, or ppnr — an area that is notoriously difficult to assess. more broadly, developing practical ways to model realistic interactions among banks and other financial institutions and between the financial and real sectors of the economy would be important advances. transparency of process and results the next element we identified as contributing to the scap ’ s success as a macroprudential exercise was transparency, both of the process and, especially, of the results. the scap was groundbreaking because it disclosed firm - specific supervisory estimates in detail, including loss amounts and rates on different types of loans, projections of net revenues, and the amount of capital each firm would have to raise to meet publicly disclosed supervisory targets ratios. these disclosures formed the template for subsequent dfast and ccar stress test results. current stress test disclosures deliver not just insight into individual banks ’ ability to withstand stressful economic outcomes, but also provide a broader perspective about the exposure of different segments of bank lending, securities and other activities to adverse economic and financial market developments. these segment - level results, aggregated across banks, are important because they have the potential to serve as public warning signals about over - heating or a build - up of risk that can supplement other cyclical macroprudential analysis. while the transparency of the supervisory stress test results was a groundbreaking element of the scap in 2009, subsequent discussion has focused largely on the transparency of the process of generating the results, in particular, information about supervisory stress test models. the fed discloses descriptive information about the models, including

. january 19, 2018. 4 an important exception to this is that losses on trading book positions and counterparty exposures as a result of the global market shock continue to be based on sensitivities generated by bank models. 5 the clearinghouse. the clearinghouse offers recommendations to improve stress testing transparency, january 22, 2018. 6 til schuermann. “ the fed ’ s stress tests add risk to the financial system. ” wall street journal. march 19, 2013. 7 w. scott frame, kristopher gerardi and paul s. willen. the failure of supervisory stress testing : fannie mae, freddie mac and ofheo, federal reserve bank of atlanta working paper 2015 – 3. march 2015. 8 board of governors of the federal reserve system. federal reserve board requests comment on package of proposals that would increase the transparency of its stress testing program, december 7, 2017. 9 see, for instance, itay goldstein and haresh sapra. “ should banks ’ stress test results be disclosed? an analysis of costs and benefits. ” foundations and trends in finance. vol. 8. march 2014. 6 / 6 bis central bankers'speeches