FED Publishes Results of the 2019 Stress Tests for Banks

By Regulatory News

June 21, 2019

Basel III, Stress Testing: US, Stress Testing

FED published a report presenting results of the Dodd-Frank Act Stress Test (DFAST) exercise for 2019. The results of this year’s stress test cycle show that all 18 banks subject to the supervisory stress test exceeded the required minimum capital and leverage ratios under the severely adverse stress scenario. However, in the aggregate, the 18 firms would experience substantial losses under both the adverse and severely adverse scenarios. Nevertheless, these firms could continue lending to businesses and households, due to the substantial build of capital since the financial crisis.

Only the largest and most complex banks were tested this year. As previously announced, smaller and less complex banks were not tested this year and are on a two-year cycle, consistent with the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. The report on the 2019 DFAST results provides:

Details of the adverse and severely adverse supervisory scenarios used in DFAST 2019
An overview of the analytical framework and methods used to generate FED’s projected results, highlighting notable changes from last year’s program
Information about recent efforts to increase transparency
Additional details about FED’s assumptions in the supervisory stress test
Results of the supervisory stress test under adverse and severely adverse scenarios for the firms that participated in DFAST 2019, presented both for individual institutions and in aggregate

The results confirm that the largest and most complex banks have strong capital levels that would allow them to stay well above the minimum requirements, after being tested against the severe hypothetical recession. In the severely adverse scenario, losses are projected to be USD 410 billion. The aggregate common equity tier 1 capital ratio would fall from an actual 12.3% in the fourth quarter of 2018 to its minimum of 9.2%, before rising to 9.7% at the end of nine quarters. Loan losses in this year's stress test are broadly comparable to those from past years. Credit card loans showed the highest losses, followed by commercial and industrial loans.

The DFAST cycle begins in the first quarter of 2019 and ends in the first quarter of 2021. The firms tested this year represent about 70% of the assets of all banks operating in the U.S. Results of the Comprehensive Capital Analysis and Review, or CCAR, will be released on June 27, 2019.

Related Links

Keywords: Americas, US, Banking, Stress Testing, Dodd-Frank Act, Stress Test Results, DFAST, CCAR, Basel III, EGRRCP Act, FED

Featured Experts

HKMA Publishes Banking Exposure Limits Code Under Banking Ordinance


News APRA Consults to Standardize Submission Date for Quarterly Reporting APRA proposed to standardize quarterly reporting due dates for authorized deposit-taking institutions. The proposed standardized due date is 35 calendar days after the last day of the reference quarter, which will create a 14-calendar-day extension for credit unions and building societies. November 08, 2019 WebPage Regulatory News
News EBA Single Rulebook Q&A: First Update for November 2019 EBA updated the Single Rulebook question and answer (Q&A) tool with answers to two questions. The answers provide clarifications on topics related to own funds and strong customer authentication under the revised Payment Services Directive or PSD2. November 08, 2019 WebPage Regulatory News
News FED Proposes to Extend Initial Compliance Dates Under SCCL Rule FED published a proposal to extend, by 18 months, the initial compliance dates for foreign banks subject to the single-counterparty credit limit (SCCL) rule. November 08, 2019 WebPage Regulatory News
News EBA Publishes Technical Package on Reporting Framework 2.9.1 EBA published a new release of the reporting framework 2.9.1. This release includes validation rules, Data Point Model (DPM) data dictionary, XBRL taxonomy, and other supporting documents. Additionally, the release fixes some modeling issues on COREP Liquidity and FINREP. November 08, 2019 WebPage Regulatory News
News EBA Publishes Methodology and Draft Templates for Stress Tests in 2020 EBA published a package for the 2020 EU-wide stress test exercise for banks. November 07, 2019 WebPage Regulatory News
News EC Publishes Results of Fitness Check of Reporting Requirements in EU EC published results of the fitness check of supervisory reporting requirements in financial services legislation in EU. November 07, 2019 WebPage Regulatory News
News BCBS Assesses NSFR and LE Rules in Argentina and China as Compliant BCBS published reports that assess the implementation of net stable funding ratio (NSFR) and large exposures, or LE, framework in Argentina and China. November 07, 2019 WebPage Regulatory News
News FSB Publishes Summary of Plenary Meeting in Paris At the meeting, the Plenary reviewed vulnerabilities in the global financial system, fintech developments (including developments in the crypto-asset markets), ongoing work of FSB, and the work program for 2020. November 07, 2019 WebPage Regulatory News
News HKMA Highlights Technology Initiatives at the Hong Kong FinTech Week HKMA co-organized, with InvestHK, the Hong Kong FinTech Week 2019, which was a five-day flagship fintech event that attracted thousands of attendees worldwide. November 06, 2019 WebPage Regulatory News
News ECB Report on Fallback Provisions in Contracts Referencing EURIBOR ECB published a report, by private sector working group on euro risk-free rates, presenting recommendations for fallback provisions in contracts for cash products and derivative transactions referencing EURIBOR. November 06, 2019 WebPage Regulatory News

RESULTS 1 - 10 OF 4118