OCC Releases 2025 Stress Testing Scenarios

The OCC released the 2025 stress testing scenarios along with related reporting forms and instructions for covered institutions. (See files, here.)

The scenarios are used to determine whether financial institutions can withstand economic downturns and continue lending under adverse conditions. The OCC tests include a baseline scenario, which "features moderate economic growth," and a severely adverse scenario, which is characterized by "a hypothetical severe global recession accompanied by a period of heightened stress in commercial and residential real estate markets and in corporate debt markets."

Under the 2025 severely adverse scenario, the US unemployment rate rises "5.9 percentage points from the scenario’s starting point of 4.1 percent in the fourth quarter of 2024 to its peak of 10 percent in the third quarter of 2026." The scenario assumes substantial asset price declines, including "a 34 percent decline in house prices and a 30 percent decline in commercial real estate prices." The scenario also incorporates a global market shock component, requiring certain large banks to apply "a set of hypothetical shocks to a large set of risk factors reflecting general market distress and heightened uncertainty."

Covered institutions are required to submit the results of their company-run stress tests to the OCC by April 5 and publish those results between June 15 and July 15.