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By Douwe Miedema
WASHINGTON, June 25 (Reuters) - The U.S. Federal Reservewill continue to add new elements to its annual check-up of thehealth of banks, Governor Daniel Tarullo said in a speech onWednesday, to keep up with change in the financial sector.
The Fed might for instance look closer at the risk of commonexposures among firms in the annual model run known as 'stresstests', which Tarullo defended as the core element of the Fed'soversight of the banking sector.
"I expect that we will devote more attention to developingthe macroprudential elements of the stress tests," Tarullo saidin the text of a speech he was due to make in Boston.
Another idea would be to test whether there could beknock-on effects from banks that started rapidly selling assetsduring a crisis. Another was to see whether banks would stillhave access to credit in times of stress.
The Fed requires banks to submit capital plans that showwhat would happen to their finances under adverse economicscenarios, and can stop the banks from raising dividends if itdeems the plans insufficient.
This year it rejected plans by Citigroup to buy back$6.4 billion of shares and boost dividends, and also objected toplans from the U.S. units of three European banks: HSBC, RBS and Santander. (Reporting by Douwe Miedema; Editing by Chizu Nomiyama)
