Fed’s stress test proposal set to publish in Federal Register Thursday

The public comment deadline of Feb. 19 remains as is – so far – but the Federal Reserve Board’s proposal to revise its stress-test rules to conform with requirements of last year’s regulatory relief law is finally set to publish Thursday in the Federal Register – delayed likely due to the federal government shutdown that was lifted in late January.

To recap, the proposed rule would modify banks’ company-run stress testing requirements to conform with the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155). It was issued Jan. 8 by the Federal Reserve Board.

Similar to those issued in December by the Federal Deposit Insurance Corp. (FDIC) and Office of the Comptroller of the Currency (OCC), the Fed proposal 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). It also would eliminate the hypothetical “adverse” scenario from stress testing, leaving two scenarios – “baseline” and “severely adverse.”

Additionally, the proposed rule would make conforming changes to the supervisory stress testing and company-run stress testing requirements applicable to bank holding companies, U.S. intermediate holding companies of foreign banking organizations, and any nonbank financial company supervised by the Fed Board; the Board’s Policy Statement on the Scenario Design Framework for Stress Testing, and the stress testing requirements for certain savings and loan holding companies that were proposed for public comment on Oct. 31, 2018. It would also the scope of applicability of the company-run stress testing requirements for certain savings and loan holding companies that were proposed for public comment on Oct. 31, 2018.

Federal Register notice (to publish Feb. 14)

RR: Fed’s company-run stress test proposal out for comment under EGRRCPA (Jan. 9, 2019)

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