FED Publishes Additional Information on Stress Testing Program
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
Featured Experts
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Laurent Birade
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Previous Article
BCBS Updates FAQs on the Basel III Standard on SA-CCRRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
