[author: Steve Quinlivan]

The Office of the Comptroller of the Currency, or OCC, has issued a bulletin to provide guidance to national banks and federal savings associations with  $10 billion or less in total assets on using stress testing to identify and quantify risk in loan portfolios and help establish effective strategic and capital planning processes.

The OCC believes that community banks, regardless of size, should have the capacity to analyze the potential impact of adverse outcomes on their financial conditions. The OCC’s guidance describes various types of stress test methods that community banks may use and provides one example of a simple stress test framework to consider. The OCC encourages community banks to adopt a stress test method that fits their unique business strategy, size, products, sophistication, and overall risk profile.

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