Federal Banking Agencies Release Economic Scenarios for 2016 Stress Testing

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On February 7, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Board) jointly released the economic scenarios that will be used by certain financial institutions with total consolidated assets of more than $10 billion for stress tests, as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The baseline, adverse and severely adverse scenarios include key variables that reflect economic activity, including unemployment, exchange rates, prices, income, interest rates and other salient aspects of the economy and financial markets.

The baseline scenario represents expectations of private sector economic forecasters. The adverse and severely adverse scenarios are not forecasts, rather, they are hypothetical scenarios designed to assess the strength and resilience of financial institutions and their ability to continue to meet the credit needs of households and businesses under stressed economic conditions.

More information from the OCC is available here and here.

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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