Federal Banking Regulators Issue Joint Release Concerning Dodd-Frank Stress Test Requirements

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a joint release reiterating the annual public disclosure requirements for medium-sized company stress tests.

Under the stress test rules required by Dodd-Frank, bank holding companies with between $10 billion and $50 billion in total consolidated assets must assess the potential impact of a minimum of three macroeconomic scenarios - baseline, adverse, and severely adverse - on their consolidated losses, revenues, balance sheet and capital. As of June 2015, these financial companies are required to publicly disclose the stress test results on an annual basis.

According to the joint release, these medium-sized companies must disclose from the severely adverse scenario: (i) a description of the types of risks included in the stress test; (ii) a summary description of the methodologies used in the stress test; (iii) estimates of aggregate losses, pre-provision net revenue, provisions for loan and lease losses, and net income; and (iv) pro forma regulatory capital ratios along with an explanation of the most significant causes for the changes in regulatory capital ratios.

Stress test results must be disclosed between June 15 and June 30.

See: FRB, FDIC and OCC Joint Release Statement; FRB Press Release.