OCC published the baseline and severely adverse scenarios for use in the upcoming Dodd-Frank Act Stress Test (DFAST) exercise for covered institutions. OCC has also published the reporting templates and instructions for data collection, which is implemented through the DAST-14A report. OCC specified that Category III banks are not required to submit stress testing data in the 2021 DFAST reporting year but these banks will be required to submit again in 2022.
OCC has developed these supervisory scenarios in coordination with the FED and FDIC. The scenarios start in the first quarter of 2021 and extend through the first quarter of 2024. Each scenario includes 28 variables; this set of variables is the same as those provided in last year’s supervisory scenarios. Each scenario includes economic variables, including macroeconomic activity, unemployment, exchange rates, prices, income, and interest rates. The baseline scenario for international economic activity and inflation features a relatively steady expansion in activity, albeit one that proceeds at different rates across countries. The severely adverse scenario, however, is characterized by a severe global recession accompanied by a period of heightened stress in commercial real estate and corporate debt markets. The international component of this scenario features severe recessions in the euro area, the United Kingdom, and Japan, along with a significant deceleration in activity in developing Asia.
Certain national banks and federal savings associations are required to conduct the company-run stress tests under the Dodd-Frank Act. OCC specifies that covered institutions are required to submit the results of their company-run stress tests by April 5 and publish those results between June 15 and July 15 each year. The results of the company-run stress tests provide OCC with the forward-looking information that is used in bank supervision and assists the agency in assessing the risk profile and capital adequacy of a company. The objective of the company-run stress test is to ensure that institutions have robust, forward-looking capital planning processes that account for their unique risks and to help ensure that institutions have sufficient capital to continue operations throughout times of economic and financial stress. These stress test results are also expected to support ongoing improvement in a covered institution's stress testing practices with respect to its internal assessments of capital adequacy and overall capital planning.
Keywords: Americas, US, Banking, DFAST, Reporting, Stress Testing, Baseline Scenario, Severely Adverse Scenario, DFAST 14A, OCC
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