FDIC, OCC and the Federal Reserve Approve Final Rules Regarding Large Bank Stress Tests and FDIC Issues Separate Rule on Large Bank Assessment Pricing

Katten Muchin Rosenman LLP
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On October 9, the Federal Deposit Insurance Corporation (FDIC), along with the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) (collectively, the Agencies), announced publication of their final rules regarding company-run stress testing required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules apply to covered institutions with total consolidated assets greater than $10 billion.

The final rules implement Section 165(i)(2)(A) of the Dodd-Frank Act, which requires all financial companies with total consolidated assets of more than $10 billion that are regulated by a primary federal financial regulatory agency to conduct an annual company-run stress test. The final rules also require institutions with assets greater than $50 billion to begin conducting annual stress tests this year, although the Agencies each preserved their authority to allow covered institutions above $50 billion to delay implementation on a case-by-case basis where warranted. It is expected that some holding companies that own multiple banks, and other non-banking companies that have never performed stress tests, may request extensions.

The rules, as was widely expected due to industry complaints, delay implementation for covered institutions with total consolidated assets between $10 billion and $50 billion until October 2013, one year later than originally planned. For institutions with assets greater than $50 billion that are required to begin stress testing this year, the Agencies anticipate releasing stress-testing scenarios to those institutions in November. These three scenarios will be "stable," "adverse" and "severely adverse." Those institutions will use their data as of September 30, 2012, to conduct the stress test. Results are due in January 2013, and a covered institution must make public the results of the stress test under severely adverse conditions in March 2013.

For institutions that have assets between $10 billion and 50 billion, public disclosure will not be required until 2015.

To view the summary by the FDIC, click here.

To view the summary by the OCC, click here.

To view the summary by the Board of Governors of the Federal Reserve System for banking organizations other than covered companies, click here.

To view the summary by the Board of Governors of the Federal Reserve System for covered companies, click here.

 

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