FED published the supervisory stress test methodology related to the 2020 Dodd-Frank Act Stress Test (DFAST). This document provides details about the models developed or selected by FED for use in the supervisory stress test and is aimed to further increase the transparency of supervisory models and results. FED also posted updated reporting forms and instructions for annual and monthly capital assessments and stress testing reports (FR Y-14A/M).
This document on supervisory stress test methodology is designed to improve the transparency around supervisory models, while maintaining the efficacy of supervisory stress test. This document provides an overview of the general approach to supervisory model development and validation in stress testing. The document also includes detailed descriptions of the supervisory stress test models and contains additional disclosures for certain material portfolios. Appendix A of the document describes a comprehensive list of changes in supervisory model that are effective for the 2020 supervisory stress test.
The supervisory stress test models may be enhanced to reflect advances in modeling techniques; enhancements in response to model validation findings; incorporation of richer and more detailed data; and identification of more stable or better-performing models, particularly under stressful economic conditions. For the 2020 supervisory stress test, FED
- Aligned the calculation of regulatory capital ratios and balances with recent changes in regulations
- Enhanced the models that project certain components of pre-provision net revenue, credit card losses, and corporate loan losses
- Completed a phase-in for the auto loan model
- Modified the trading and private equity model
In addition to these model changes, FED made less material enhancements to simplify models and account for changes in the historical data used to estimate the models.
- Supervisory Stress Test Methodology (PDF)
- FR Y-14A: Reporting Forms and Instructions
- FR Y-14M: Reporting Forms and Instructions
- Reporting Form Updates
Keywords: Americas, US, Banking, Stress Testing, DFAST, Dodd-Frank Act, Disclosures, Transparency, Reporting, FR Y-14, FED
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