OCC issued a proposed rule on the company-run stress testing requirements for national banks and Federal savings associations. The proposal amends the stress testing rule (12 CFR part 46) that implements the stress testing requirements of section 165(i)(2) of the Dodd–Frank Act, consistent with the requirements imposed by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act). OCC will accept comments on this notice of proposed rule-making through February 19, 2019.
The proposed rule would make the following amendments:
- Revise the minimum threshold for national banks and federal savings associations to conduct stress tests from USD 10 billion to USD 250 billion
- Revise the frequency by which certain national banks and federal savings associations would be required to conduct stress tests
- Reduce the number of required stress testing scenarios from three to two
- Make certain additional facilitating and conforming changes to the stress testing requirements
Section 401 of EGRRCP Act amends section 165 of the Dodd-Frank Act by raising the minimum asset threshold for banks required to conduct stress tests from USD 10 billion to USD 250 billion. The proposed rule implements this change by eliminating the two existing subcategories of “covered institution”—USD 10 to USD 50 billion covered institution and USD 50 billion or over covered institution—and revising the term “covered institution” to mean a national bank or FSA with average total consolidated assets, calculated as required under this part, that are greater than USD 250 billion. In addition, the proposal makes certain technical and conforming changes to the rule to consolidate requirements that were applied differently to USD 10 to USD 50 billion covered institutions and USD 50 billion or over covered institutions.
Furthermore, EGRRCP Act eliminates the requirement under section 165 of the Dodd-Frank Act for covered institutions to conduct stress tests on an “annual” basis and, instead, requires that they be “periodic.” Although the term “periodic” is not defined in EGRRCP Act, OCC is proposing that, in general, a covered institution would be required to conduct, report, and publish a stress test once every two years, beginning on January 1, 2020, and continuing every even-numbered year thereafter (that is, 2022, 2024, 2026, and so on). However, a covered institution that is consolidated under a holding company that is required to conduct a stress test at least once every calendar year (pursuant to the FED regulations at 12 CFR part 252) would be required to conduct, report, and publish its stress test annually.
Comment Due Date: February 19, 2019
Keywords: Americas, US, Banking, Stress Testing, Dodd Frank Act, EGRRCP Act, DFAST, OCC
Previous ArticleSEC Reports on CRAs Examine CRA Focus on Compliance and Competition
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.
FED released hypothetical scenarios for a second round of stress tests for banks.
FED is proposing to temporarily revise the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes necessary to conduct stressed analysis in connection with the re-submission of capital plans, using data as of June 30, 2020.
FED adopted a proposal to extend for three years, with revision, the information collection under the market risk capital rule (FR 4201; OMB No. 7100-0314).
EBA published a voluntary online survey seeking input from credit institutions on their practices and future plans for Pillar 3 disclosures on the environmental, social, and governance (ESG) risks.