OCC releases its own set of stress test scenarios for 2021; results due back by April 5

Economic and financial market scenarios for use in upcoming stress tests for covered institutions were released Friday by the regulator of national banks.

The Federal Reserve issued its own set of scenarios the same day.

In a release, the Office of the Comptroller of the Currency (OCC) said the supervisory scenarios include baseline and severely adverse scenarios, as described in the agency’s rule implementing stress test requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank).

Under its own rules, the OCC must provide stress-test scenarios to covered institutions by Feb. 15. Results are due to the OCC by April 5, with publication by the agency between June 15 and July 15.

Under the 2019 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), the minimum threshold for stress testing was set at $250 billion. The law also modified the frequency of company-run stress tests for certain national banks and federal savings associations, and reduced the number of required stress testing scenarios.

“Covered institutions are required to use the scenarios to conduct stress tests,” the OCC said. “The results of the company-run stress tests provide the OCC with forward-looking information used in bank supervision and assist the agency in assessing the company’s risk profile and capital adequacy.”

The scenarios, the OCC typically points out, are not forecasts. Instead, according to the agency, they include baseline and severely adverse scenarios. Economic variables, including macroeconomic activity, unemployment, exchange rates, prices, income, and interest rates are included in the baseline. The severely adverse scenario is a hypothetical scenario designed to assess the strength and resilience of financial institutions, the agency said.

OCC Releases Dodd-Frank Act Stress Test Scenarios for 2021