December 18, 2018

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.

 

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Comment Due Date: February 19, 2019

Keywords: Americas, US, Banking, Stress Testing, Dodd Frank Act, EGRRCP Act, DFAST, OCC

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