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    FDIC Releases Economic Scenarios for Stress Testing in 2020

    February 14, 2020

    FDIC released the hypothetical economic scenarios for use in the upcoming stress tests for covered institutions with total consolidated assets of more than USD 250 billion. The supervisory scenarios include baseline and severely adverse scenarios. FDIC coordinated with FED and OCC in developing and distributing these scenarios.

    The baseline scenario is in line with a survey of private sector economic forecasters. The severely adverse scenario is not a forecast, rather, it is a hypothetical scenario designed to assess the strength and resilience of financial institutions. Each scenario includes 28 variables, such as gross domestic product, the unemployment rate, stock market prices, and interest rates, and covers domestic and international economic activity. The Dodd-Frank Act requires certain financial companies, including certain state non-member banks and state savings associations, to conduct stress tests. In 2018, Congress increased the size of a covered institution from USD 10 billion to USD 250 billion. Rules state that FDIC will provide scenarios to covered institutions by February 15 of each reporting year. 

     

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    Keywords: Americas, US, Banking, Stress Testing, Stress Testing Scenarios, Baseline Scenario, Severely Adverse Scenario, Dodd-Frank Act, FDIC

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