FDIC and OCC Propose Revisions to Stress Test Requirements

The FDIC and OCC (collectively, the Agencies) recently issued notices of proposed rulemaking, inviting comments on proposals to increase the minimum thresholds under the Agencies’ rules for national banks and federal savings associations to conduct stress tests from $10 billion to $250 billion in total consolidated assets.

In addition, the proposed rules would require a biennial stress testing cycle, instead of the current annual stress testing cycle, for most covered institutions.  However, covered institutions that are subsidiaries of global systemically important bank holding companies or bank holding companies that have $700 billion or more in total assets (or have cross-jurisdictional activity of $75 billion or more) would be required to conduct and report stress tests annually, on the same schedule that their bank holding companies are required to conduct and report stress tests.

Moreover, under the current rules, stress tests must include at least the following three different stress-testing scenarios: (1) baseline, (2) adverse, and (3) severely adverse.  The proposed rules would remove the requirement to include the “adverse” stress-testing scenario, but maintain the requirement to include the “baseline” and “severely adverse” stress-testing scenarios.  In proposing to remove the “adverse” stress-testing scenario, the Agencies stated that the “adverse” stress-testing scenario has only provided limited incremental information beyond the information provided by the “baseline” and “severely adverse” stress-testing scenarios.

Comments on the proposed rules must be submitted by February 19, 2019.  A copy of the FDIC’s proposed rule can be found here.