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The Moody’s Analytics Regulatory Timeline provides a high-level overview of the stress testing regulations in both the United States and European Union in the immediate and medium-term. The US CCAR stress tests will expand over the next few years, requiring both large and mid-sized banks to develop processes and systems to support the tests.

Figure 1. Regulatory timeline
Regulatory timeline
Source: Moody's Analytics primary market research and analysis

The US Stress Testing Requirements Guide is designed to provide a snapshot of the requirements in a simple-to-use framework. This tool is particularly helpful for stress testing exercise planning and highlights a few key trends related to stress testing regulations:

  • Tests are becoming more comprehensive: Creating a need to forecast a wider range of risk and finance indicators
  • The scope of the tests are broadening: Meaning that over time more banks are required to conduct annual internal and supervisory stress tests
  • The frequency of the tests is increasing: Requiring quarterly calculations and semi-annual to annual reporting of stress testing results
  • More transparency is required: Increasing disclosures by banks and SIFIs is required to meet market confidence objectives
Figure 2. US Stress Testing Requirements Guide
US Stress Testing Requirements Guide
Source: Moody's Analytics
Sources and Notes

1 Applicable to 6 BHCs with large trading, private equity, and counterparty exposures from derivatives and financing transactions.

2 Planning horizon: December 31st year x through December 31st year x+2. Data as of September 30th year x for annual stress tests. Data as of March 31st year x for semi-annual stress tests.

3 The Fed uses BHCs’ planned capital actions, and assesses whether a BHC would be capable of meeting supervisory expectations for minimum capital ratios even if stressful conditions emerged and the BHC did not reduce planned capital distributions.

4 Each BHC maintains its common stock dividend payments at the same level as the previous year; scheduled dividend, interest, or principal payments on any other capital instrument eligible for inclusion in the numerator of a regulatory capital ratio are assumed to be paid; but repurchases of such capital instruments and issuance of stock is assumed to be zero.

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