March 28, 2019

FED published a document providing additional information on its stress testing program. This additional information follows the finalized changes, which were published in February 2019 and intended to enhance the transparency of its stress tests without compromising the ability to test the resilience of the largest banks in the nation. The document provides details about the models developed or selected by FED for use in the supervisory stress test.

Additional information on loss rates is provided for the models used for corporate loans and credit cards. These two models accounted for roughly half of the total projected loan losses in the 2018 stress test of FED. Similar information will be provided in 2020 for two additional models. The additional information consists of the following:

  • Ranges of loss rates, projected using the models of FED for loans that are grouped by distinct risk characteristics
  • Portfolios of hypothetical loans with loss rates projected by the models of FED
  • Enhanced descriptions of the models of FED

The document provides an overview of the general approach to supervisory model development and validation in stress testing, also summarizing the supervisory modeling framework and methodology. The document includes detailed description of the supervisory stress test models and contains additional disclosures for certain material portfolios, including modeled loss rates on pools of loans and loss rates associated with portfolios of hypothetical loans. Finally, Appendix A to the document describes a comprehensive list of supervisory model changes effective for Dodd-Frank Act Stress Test (DFAST) in 2019.

 

Related Links

Keywords: Americas, US, Banking, Stress-Testing, DFAST, Stress Test Models, CCAR, FED

Related Articles
News

CFTC Proposes to Amend Derivatives Clearing Organization Regulations

CFTC proposed amendments to certain regulations applicable to registered derivatives clearing organizations (DCOs) under Part 30 of the CFTC regulations.

May 16, 2019 WebPage Regulatory News
News

APRA Licenses Societe Generale As Foreign Deposit-Taking Institution

APRA granted Societe Generale a license to operate as a foreign authorized deposit-taking institution under the Banking Act of 1959.

May 16, 2019 WebPage Regulatory News
News

EBA Provides Updates on Its Work on Basel III Impact Assessment in EU

EBA is working to finalize the impact assessment on implementation of Basel III standards, in response to the EC call for advice, which was received on May 04, 2018.

May 16, 2019 WebPage Regulatory News
News

FED Publishes Report Summarizing Regulatory and Supervisory Activities

FED published a report that summarizes banking conditions and the supervisory and regulatory activities of FED, in conjunction with semiannual testimony before Congress by the Vice Chairman for Supervision.

May 15, 2019 WebPage Regulatory News
News

US Agencies Propose to Amend Regulatory Framework for Foreign Banks

US Agencies (OCC, FED, and FDIC) proposed a regulatory framework for foreign banks operating in the U.S. that would more closely match the rules for foreign banks with the risks they pose to the U.S. financial system.

May 15, 2019 WebPage Regulatory News
News

ECB Consults on EONIA to €STR Legal Action Plan

ECB published a consultation, which was launched by the working group on euro risk-free rates, on recommendations to address the legal implications for new and legacy contracts referencing the euro overnight index average (EONIA), as a result of the proposed transition from EONIA to the euro short-term rate (€STR).

May 15, 2019 WebPage Regulatory News
News

FASB Offers Targeted Transition Relief Under Credit Losses Standard

FASB issued an Accounting Standards Update 2019-05 (on Topic 326) that eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value.

May 15, 2019 WebPage Regulatory News
News

European Council Adopts Updated Rules on Clearing of OTC Derivatives

European Council adopted a regulation improving the existing regulatory framework applicable to the market for over-the-counter (OTC) derivatives.

May 14, 2019 WebPage Regulatory News
News

European Council Adopts Package on CRD 5, CRR 2, BRRD 2, and SRMR 2

European Council adopted a comprehensive legislative package that will reduce risks in the banking sector and further reinforce banks' ability to withstand potential shocks.

May 14, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Second Update for May 2019

EBA published answers to two questions under the Single Rulebook question and answer (Q&A) updates for this week.

May 10, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3080