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

    EBA Publishes Standards on Disclosure of Investment Policy Under IFR

    The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).

    October 19, 2021 WebPage Regulatory News
    News

    EBA Updates Filing Rules for Supervisory Reporting

    The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.

    October 19, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Procedures for Collection of AnaCredit Data

    The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.

    October 19, 2021 WebPage Regulatory News
    News

    APRA Finalizes Guidance for New Prudential Standard on Remuneration

    The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.

    October 18, 2021 WebPage Regulatory News
    News

    OCC Updated LIBOR Self-Assessment Tool for Banks

    The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).

    October 18, 2021 WebPage Regulatory News
    News

    TCFD Updates Guidance for Financial Disclosures on Climate Risk

    The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

    October 14, 2021 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel III Framework

    The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.

    October 14, 2021 WebPage Regulatory News
    News

    ACPR Implements Updates Related to DPM Version 3.1

    The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.

    October 14, 2021 WebPage Regulatory News
    News

    EBA Note Examines Transition Risks of Benchmark Rates

    The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.

    October 14, 2021 WebPage Regulatory News
    News

    OSFI to Communicate Next Steps on Climate Risk Policy in Early 2022

    In a letter to the federally regulated financial institutions and pension plans, the Office of the Superintendent of Financial Institutions (OSFI) published a summary of the feedback received to the January 2021 discussion paper on ways to address climate risks.

    October 12, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7568