Are mid-sized banks stressed?

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On March 5, 2014, the Federal Reserve, the FDIC and the Comptroller of the Currency issued a press release regarding their final guidance to medium-sized banks and financial companies for mandatory, annual stress tests. Financial institutions with total assets of $10 - $50 billion are required to conduct the stress tests annually under rules issued pursuant to Dodd-Frank.

Medium-sized banks must assess the potential impact of at least three macroeconomic scenarios (baseline, adverse and severely adverse) on their consolidated losses, revenues, balance sheet and capital. The “baseline scenario” represents conditions affecting the U.S. economy or the financial company based on consensus views of the current economic and financial outlook. The “adverse scenario” represents a set of conditions that are more adverse than the baseline scenario. The “severely adverse scenario” includes a set of conditions that are more severe than those associated with the adverse scenario. The final guidance also includes general supervisory expectations for the stress tests, and provides examples of practices consistent with the varying degrees of expectations. Hypothetical supervisory scenarios will be provided annually on or before November 15 of each calendar year.

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Topics:  Banks, Dodd-Frank, FDIC, Stress Tests

Published In: Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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