FDIC Releases Dodd-Frank Supervisory Stress Test Scenarios

The Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System released supervisory stress test scenarios for the upcoming stress tests for covered institutions with more than $10 billion in assets.

The Government Accountability Office issued a report containing recommendations to improve the effectiveness of Federal Reserve System stress test programs.

The Board of Governors of the Federal Reserve System determined that "the nation's largest bank holding companies continue to build their capital levels and improve their credit quality, strengthening their ability to lend to households and businesses during a severe recession."

The FDIC released a Statement of Policy outlining principles for the development and distribution of stress test scenarios to assess the potential impact of economic conditions on covered banks' earnings, losses, and capital. Stress tests help both banks and the FDIC ensure sufficient capital to absorb losses under adverse economic conditions, with scenarios based on baseline, adverse, and severely adverse financial conditions. The FDIC collaborates with other regulatory bodies to develop these scenarios, which are distributed annually to covered banks by November 15th.