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Financial Services Law Insights and Observations

Federal Reserve issues proposal amending stress test requirements

Agency Rule-Making & Guidance Federal Reserve FDIC OCC EGRRCPA

Agency Rule-Making & Guidance

On January 8, the Federal Reserve Board (Board) issued a notice of proposed rulemaking (NPR) that would revise company-run stress test and supervisory stress test requirements to conform with Section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act). Similar to the previously issued NPRs by the FDIC and the OCC (covered by InfoBytes here), the proposed rule will, among other things, change the minimum threshold for applicability from $10 billion to $250 billion in consolidated assets and revise the frequency of required company-run stress tests for most state member banks from annual to biannual. However, the proposed rule notes that certain state member banks will still be required to conduct annual stress tests, such as (i) those that are subsidiaries of global systemically important bank holding companies; (ii) bank holding companies that have $700 billion or more in total assets; or (iii) cross-jurisdictional activity of $75 billion or more. Furthermore, the proposed rule will remove the “adverse” stress testing scenario—which the Board states has provided “limited incremental information”—and require stress tests to be conducted under the “baseline” and “severely adverse” stress testing scenarios. Comments on the NPR must be received by February 19.

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