Featured Product

    FDIC Adopts Revisions to Company-Run Stress Testing Requirements

    October 24, 2019

    FDIC adopted the final rule to amend its company-run stress testing regulations applicable to state non-member banks and state savings associations, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. The final rule revises the minimum threshold for applicability from USD 10 billion to USD 250 billion, revises the frequency of required stress tests by FDIC-supervised institutions, and reduces the number of required stress testing scenarios from three to two. The final rule also makes certain conforming and technical changes. The changes impact the FDIC form DFAST 14A (Summary and Scenario sections). The final rule is effective from November 25, 2019.

    FDIC, on December 28, 2018, had issued a proposed rule to amend its stress testing requirements, consistent with section 401 of EGRRCP Act. FDIC has received six comments in response to the proposed rule. FDIC is adopting, without change, the proposed revisions to the stress testing rule. Section 401 of EGRRCP Act amended 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 final rule implements this change by eliminating the two existing subcategories of covered bank—“USD 10 to USD 50 billion covered bank” and “over USD 50 billion covered bank”—and revising the term covered bank to mean a state non-member bank or state savings association with average total consolidated assets that are greater than USD 250 billion.

    No FDIC-supervised institutions with total consolidated assets of USD 600 million or less are subject to 12 CFR part 325. Therefore, the final rule would not affect any small, FDIC-supervised institutions. The final rule provides that, in general, an FDIC-supervised institution that is a covered bank as of December 31, 2019, is required to conduct, report, and publish a stress test once every two years, beginning on January 01, 2020. The final rule also adds a new defined term, “reporting year,” to the definitions at 12 CFR 325.2. The reporting year for a covered bank is the year in which a covered bank must conduct, report, and publish its stress test. The “reporting year” for most covered banks would generally be every even-numbered year. The final rule also removes the “adverse” scenario in the FDIC stress testing rule and maintains the requirement to conduct stress tests under the “baseline” and “severely adverse” stress testing scenarios. The final rule amends the definition of “severely adverse scenario” so that the term is defined relative to the “baseline scenario,” rather than relative to the “adverse scenario.”

    The final rule revises the transition period in 12 CFR 325.3 to conform to the other changes in this final rule. FDIC may require a covered bank with significant trading activities to include trading and counterparty components in its adverse and severely adverse scenarios. The trading data to be used in this component is as of a date between January 01 and March 01 of a calendar year. FED and OCC extended this range to run from October 01 of the calendar year preceding the year of the stress test to March 01 of the calendar year of the stress test. The final rule adopts the same change to the FDIC stress testing regulation, extending the range of as-of dates from October 01 of the preceding calendar year to March 01 of the calendar year of the stress test. Extending the as-of date range ensures consistency with FED and OCC rules and increases the FDIC flexibility to choose an appropriate as-of date.

     

    Related Link: Federal Register Notice

    Effective Date: November 25, 2019

    Keywords: Americas, US, Banking, Stress Testing, Dodd-Frank Act, EGRRCP Act, DFAST, Reporting, DFAT 14A, FED, OCC

    Featured Experts
    Related Articles
    News

    BoE Clarifies Approach to Treatment of Payment Holidays on Form PL

    BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.

    August 11, 2020 WebPage Regulatory News
    News

    BoE Provides Reporting Update on Form AS and Form FV

    BoE updated the known issues document for the statistical reporting Forms AS and FV.

    August 10, 2020 WebPage Regulatory News
    News

    FED Announces Capital Requirements for Large Banks

    FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.

    August 10, 2020 WebPage Regulatory News
    News

    SRB Publishes Guidance on Implementation of Bail-In Tool

    SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.

    August 10, 2020 WebPage Regulatory News
    News

    BIS Publishes Update on G20 TechSprint Initiative

    BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.

    August 10, 2020 WebPage Regulatory News
    News

    OSFI Provides Update on Implementation of IFRS 17 in Canada

    OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.

    August 07, 2020 WebPage Regulatory News
    News

    EBA Provides Clarity on Implementation of Guidance on COVID Reporting

    EBA updated the report on the implementation of selected COVID-19 policies.

    August 07, 2020 WebPage Regulatory News
    News

    FSI Note Discusses Challenges Associated with COVID Relief Measures

    The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.

    August 06, 2020 WebPage Regulatory News
    News

    BCBS Consults on Principles for Operational Risk and Resilience

    BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.

    August 06, 2020 WebPage Regulatory News
    News

    BoE Updates Template and Definitions for Form ER

    BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.

    August 05, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5650