Existing stress testing regulations would change – and be EGRRCPA-compatible — under agency proposal

The minimum threshold for applicability of stress tests would jump from $10 billion to $250 billion, the frequency of required stress tests would move to “periodic,” and the number of required stress testing scenarios would be reduced from three to two under a rule proposed Tuesday by the Federal Deposit Insurance Corp. (FDIC) Board.

The proposal – issued for a 60-day comment period, closing Feb. 19 – was made to be consistent with changes made under the law by last spring’s Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), S. 2155, the FDIC said. It affects FDIC-supervised state non-member banks and savings associations.

The proposal notes that section 401 of EGRRCPA raises the minimum asset threshold for the company-run stress testing requirement, changes the required frequency and reduces the number of required stress-test scenarios (as EGRRCPA “no longer requires the ‘adverse’ stress-testing scenario.”)

“The EGRRCPA amendments to the section 165(i)(2) (of the Dodd-Frank Act) stress testing requirements are effective eighteen months after enactment,” the proposal notes.

Before passage of S. 2155 in May, the FDIC said, last April the agency issued a notice of proposed rulemaking that also proposed certain revisions to the FDIC stress-testing regulations. “Certain changes proposed in the April NPR, particularly those establishing a stress testing transition process for ‘over $50 billion covered banks’ are no longer relevant as a result of EGRRCPA’s increase in the stress testing asset threshold to $250 billion,” the agency noted. “However, other revisions originally proposed in the April NPR remain necessary to ensure the FDIC’s stress testing regulations remain consistent with those of the (Federal Reserve) Board and the Office of the Comptroller of the Currency (OCC).”

FDIC Issues Notice of Proposed Rulemaking: Company-Run Stress Testing Requirements for FDIC-supervised State Nonmember Banks and State Savings Associations