The Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (“FDIC”) and the Office of the Comptroller of the Currency (“OCC”) released economic and financial market scenarios that financial institutions will be required to use as part of the 2015 Capital Planning and Stress Testing Program.
Section 165(i)(2) of the Dodd-Frank Act requires certain financial companies, including national banks and federal savings associations with at least $10 billion in total consolidated assets, to conduct annual stress tests. The FRB, FDIC and OCC coordinated the development of “adverse,” “severely adverse” and “baseline” supervisory scenarios, which incorporate economic variables such as growth, unemployment, exchange rates and interest rates, for use by covered financial institutions.
The Capital Planning and Stress Testing Program also includes the FRB’s Comprehensive Capital Analysis and Review (“CCAR”) of 31 bank-holding companies with at least $50 billion in total consolidated assets. Covered institutions will be required to apply the released supervisory scenarios to stress tests conducted pursuant to both Dodd-Frank and CCAR. Companies not subject to CCAR, such as state member bank subsidiaries of CCAR participants, will still apply the supervisory scenarios to Dodd-Frank stress tests.