Featured Product

    FED Amendments to Increase Transparency of Its Stress Testing Program

    February 28, 2019

    FED (or the Board) finalized a set of changes that will increase the transparency of its stress testing program for the nation's largest and most complex banks. FED adopted a final policy statement on the approach to supervisory stress testing conducted under its stress testing and capital plan rules. Also finalized was an enhanced disclosure of the models used in the supervisory stress test conducted under FED's Regulation YY and the capital plan rule. Additionally, FED adopted amendments to its policy statement on the scenario design framework for stress testing. These changes will be effective from April 01, 2019.

    As part of the enhanced disclosure, the first change, which will begin for the 2019 stress test cycle and expand in subsequent years, will provide significantly more information about the stress testing models used in the Board's annual Comprehensive Capital Analysis and Review (CCAR). That information will include:

    • Ranges of loss rates, estimated using the Board's models, for actual loans held by CCAR firms
    • Portfolios of hypothetical loans with loss rates estimated by the Board's models
    • More detailed descriptions of the Board's models, such as certain equations and key variables that influence the results of the models

    Using this additional information, a firm would be better able to evaluate the risks in its own portfolio or compare the losses from its own models to losses from the Board's models. In response to comments received on the proposal from December 2017, the Board will provide additional information on a number of models, including those used to project operational-risk losses and pre-provision net revenue. The model disclosure will be updated each year and published in the first quarter of the year. In addition, FED finalized the stress testing policy statement, which elaborates on prior disclosures by describing the Board's approach to model development, implementation, and validation. The statement describes seven principles that have guided supervisory stress test modeling in the past and will continue to do so.

    Finally, FED modified its framework for the design of the annual hypothetical economic scenarios. The modifications will provide more information on the hypothetical path of the unemployment rate and will introduce a quantitative guide for the hypothetical path of house prices, both of which are key variables for the scenarios. In a change from its proposal, the Board will not add variables to the hypothetical stress test scenario related to funding costs. The Board will further explore incorporating stress to certain types of funding into its stress testing program in the future.

     

    Related Links

    Effective Date: April 01, 2019

    Keywords: Americas, US, Banking, Stress Testing, Policy Statement, CCAR, Regulation YY, FED

    Featured Experts
    Related Articles
    News

    ECB Allows Temporary Relief in Leverage Ratio Amid COVID-19 Pandemic

    ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.

    September 21, 2020 WebPage Regulatory News
    News

    ESAs Launch Survey on Templates for Product Disclosures Under SFDR

    ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).

    September 21, 2020 WebPage Regulatory News
    News

    ECB Proposes Integrated Reporting Framework to Reduce Burden for Banks

    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.

    September 21, 2020 WebPage Regulatory News
    News

    ECB Finalizes Methodology to Assess CCR and A-CVA Risk of Banks

    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.

    September 18, 2020 WebPage Regulatory News
    News

    EBA Provides Opinion on Definition of Credit Institution in CRR

    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).

    September 18, 2020 WebPage Regulatory News
    News

    APRA Consults on Alignment of Daily Liquidity Report for Banks

    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.

    September 17, 2020 WebPage Regulatory News
    News

    FED Releases Scenarios for Second Round of Stress Tests on Banks

    FED released hypothetical scenarios for a second round of stress tests for banks.

    September 17, 2020 WebPage Regulatory News
    News

    FED to Temporarily Revise FR Y-14 Reports to Conduct Stressed Analysis

    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.

    September 17, 2020 WebPage Regulatory News
    News

    FED Revises Information Collection Under Market Risk Capital Rule

    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).

    September 17, 2020 WebPage Regulatory News
    News

    EBA Seeks Input on ESG Disclosure Practices of Banks

    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.

    September 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5809