Fed’s company-run stress test proposal out for comment under EGRRCPA

Similar proposals went out in December from FDIC, OCC

A proposal to modify banks’ company-run stress testing requirements to conform with the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155) was issued Tuesday by the Federal Reserve Board with a public comment deadline of Feb. 19.

The proposal, similar to those issued last month by the Federal Deposit Insurance Corp. (FDIC) and Office of the Comptroller of the Currency (OCC), and with the same public comment deadline, would raise the threshold requiring state-member banks to conduct their company-run stress tests from $10 billion in total consolidated assets to $250 billion. In place of the current annual cycle, the proposal also would generally require firms above the threshold to conduct company-run stress tests once every other year (the new law replaces the yearly testing requirement with a periodic one).

As required by EGRRCPA, the proposal also would eliminate the hypothetical “adverse” scenario from stress testing, leaving two scenarios – “baseline” and “severely adverse.”

The Fed’s proposal also revises the scope of applicability of company-run stress testing requirements for certain savings and loan holding companies that were proposed in October.

Federal Reserve Board invites public comment on proposal that would modify company-run stress testing requirements to conform with Economic Growth, Regulatory Relief, and Consumer Protection Act

Fed Board proposal (Notice for Federal Register)

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