Stress Tests

Agencies Release Economic Scenarios for 2015 Stress Testing

On October 23, regulators released the economic scenarios that will be used by financial institutions with total assets of over $10 billion for stress tests required under Dodd-Frank. The baselineadverse, and severely adverse scenarios include 28 variables that reflect economic activity, including unemployment, exchange rates, prices, income, interest rates, and other relevant parameters of the economy.  Regulatory review will cover 31 companies that will have to submit their capital plans on or before January 5, 2015.  Fed Release.  FDIC Release.

Fed Methodology for Stress Tests

On March 12, the Fed described its methodology for the stress tests in the 2012 Comprehensive Capital Analysis and Review.  The supervisory stress scenario, which is not the Fed’s forecast for the economy, depicts a severe recession in the U.S., including a peak unemployment rate of 13%, a 50% drop in equity prices, and a 21% decline in housing prices.  The results for the 19 bank holding companies that participated in the tests will be released on March 15.  Fed Release.

FDIC Proposed Stress Tests

On February 3, the FDIC requested comment on a notice of proposed rulemaking to implement Section 165(i)(2) of the Dodd-Frank Act which requires FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with total consolidated assets of more than $10 billion to conduct annual stress tests. Comments must be submitted by March 23. This notice of proposed rulemaking is substantively similar to regulations proposed by the Fed and the OCC. FDIC Release. Notice of Proposed Rulemaking.

OCC Proposed Stress Tests

On January 24, the OCC requested comment on a notice of proposed rulemaking to implement Section 165(i)(2) of the Dodd-Frank Act, which would: (i) require national banks and Federal savings associations with consolidated assets of more than $10 billion to conduct annual stress tests and (ii) impose reporting and disclosure requirements. Comments must be submitted by March 26. OCC Release. Proposed Rule.

FDIC Proposed Stress Testing for Large Banks

On January 17, the FDIC approved a notice of proposed rulemaking to implement Section 165(i)(2) of the Dodd-Frank Act, which would require FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with consolidated assets of more than $10 billion to conduct annual capacity-adequacy stress tests. Comments must be submitted within 60 days of publication in the Federal Register. FDIC Release. Proposed Rule.

Capital Assistance Program Closes

On November 9, Treasury announced that the Capital Assistance Program, created to provide additional taxpayer support to financial institutions subject to stress tests under the Supervisory Capital Assessment Program, closed with no investments having been made. Treasury Release. Fed Release.