Federal Reserve releases additional information on stress testing

Federal Issues Federal Reserve Stress Test Dodd-Frank

On March 28, the Federal Reserve Board released a report titled, “Dodd-Frank Act Stress Test 2019: Supervisory Stress Test Methodology,” which details the models and methodologies the Board will use for 2019 stress tests. The release is intended to “increase the transparency of [the Board’s] stress tests without compromising [its] ability to test the resiliency of the nation's largest banks.” Specifically, the report provides more information than in years past on the models that are used to project bank losses, including (i) ranges of loss rates for loans that are grouped by distinct risk characteristics; (ii) examples of portfolios with hypothetical loans with projected loss rates; and (iii) enhanced descriptions of models.