The following article, originally published at 2:42 p.m. on Nov. 15, 2016, has been updated with comments from Fed officials and lawmakers.
The more you know about what a test will cover, the easier it is to prepare.
That's a premise that holds true from elementary school spelling quizzes to university finals and regulatory reviews of larger corporations, such as the annual stress tests given to the biggest U.S. banks.
Banks are required to pass the reviews in order to make billions of dollars in share repurchases and dividend payments, but critics have pointed out that the opaque nature of some of the criteria, particularly the so-called qualitative assessments, makes it difficult for executives to determine what the Federal Reserve expects until it's too late.
Correcting that is one of the key changes recommended in a review of the stress tests published Tuesday by the Government Accountability Office, the investigative arm of Congress.
"Transparency is a key feature of accountability and such incomplete disclosure may limit" understanding of the assessments as well as the market's confidence in the reviews," the accountability office said. Limited transparency also makes it difficult to ensure the Fed is treating disparate companies fairly, the report said.
The central bank "hasn't disclosed information needed to fully understand its assessment approach or the reasons for decisions to object to a company's capital plan" on qualitative grounds, the office said in the report, requested by House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican.
"Other than the Fed, nobody's really happy with the stress tests," Richard Bove, an analyst with Rafferty Capital Markets, said in a telephone interview after the report was published. Both banks and their investors, who rely on the information, would prefer greater clarity, he said.
The examinations were established as Congress sought to prevent a recurrence of the 2008 financial crisis, when the imploding $15 trillion U.S. mortgage market led to the collapse of investment bank Lehman Brothers and froze global credit markets.