Flannery selected for Federal Reserve Board special committee

GAINESVILLE, Fla. – Bank of America Eminent Scholar Chair Dr. Mark Flannery was one of six academic scholars selected to the Model Validation Council, a newly-formed committee by the Federal Reserve Board.

“I have studied the financial sector almost my entire career, and the Fed’s Model Valuation Council provides an opportunity to help refine this important regulatory process,” Dr. Flannery said. “I am looking forward to being involved.”

The Model Validation Council “will provide the Federal Reserve with expert and independent advice on its process to rigorously assess the models used in stress tests of banking institutions.”

The Federal Reserve is required to conduct stress tests on large bank holding companies per the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Council “will provide input on the Board’s efforts to assess the effectiveness of the models used in the stress tests and improve the quality of the Federal Reserve’s model assessment program and to strengthen the confidence in the integrity and independence of the program.”

Dr. Flannery said stress tests were completed in March and will be re-run annually.

“The goal is to simulate the impact of a large negative shock on the stability of large financial institutions, and of the financial system itself,” Dr. Flannery said. “The tests require complex modeling of many aspects of the banking business, in order to understand potential threats to financial stability. It is a complex process and regulators around the world have just begun to grapple with the underlying issues.”

In addition to Dr. Flannery, the other scholars selected to the Model Validation Council were Francis X. Diebold, economics professor in the Department of Economics at the University of Pennsylvania (chair) ; Peter Christoffersen, professor at the Rotman School of Management at the University of Toronto ; Philippe Jorion, professor at the Paul Merage School of Business at the University of California at Irvine; Chester Spatt, professor at the Tepper School of Business at Carnegie Mellon University and Allan Timmermann, professor at the Rady School of Management at the University of California at San Diego.

Dr. Flannery teaches corporate finance and financial management of financial institutions at the graduate level and his research has explored government regulation of the financial sector. He has served as Resident Scholar at the Federal Reserve Bank of New York and as an Advisory Committee member on the Federal Reserve Bank of Atlanta’s Center for Financial Innovation and Financial Stability.
Dr. Flannery received a Bachelor of Arts from Princeton University in 1972, and earned a Master of Arts in Economics (1973), an M. Phil in Economics (1974) and a Ph.D. in Economics (1978) all from Yale University.