The Federal Reserve Board is coupling examinations of bank mortgage portfolios with offsite analysis of housing and mortgage trends under various economic and financial scenarios.
Fed chairman Ben Bernanke told a Senate panel this week the central bank is taking a "holistic" approach to supervision.
"We have revamped our supervisory organization to take a more multi-disciplinary approach and to do stress tests which are based on alternative macro-economic or financial scenarios," Bernanke testified.
During the financial crisis, the Fed chief said this approach was "very helpful" in conducting the stress tests of the 19 largest banks. "We were able to supplement the bank's assessments of the value of their mortgages with a model-based econometric analysis that drew on information about individual housing markets and the relationship of house prices to macro-economic developments," he said.
The Fed is setting up a new Office of Financial Stability that will draw on staff expertise in economics, finance, payment systems, accounting and other fields to monitor a wide range of markets and institutions.
This office will be responsible for generating the scenarios for the stress tests.
The Fed chief indicated the Fed's analysis of the housing and mortgage markets might be released in reports the new interagency Financial Stability Oversight Council makes to Congress.
