The FDIC is seeking comments on a proposed rule under the Dodd-Frank Act that would require covered banks to conduct annual stress tests.
The rule, required by Dodd-Frank, would apply to FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with more than $10 billion in total consolidated assets.
The proposal requires covered state nonmember banks to conduct annual capital adequacy stress tests using financial data as of Sept. 30 based on three scenarios that will be annually identified by the FDIC. The results of the tests would have to be reported to the FDIC by Jan. 5, and for a public summary to be released within 90 days after the report is filed.
The goal of the stress test is to evaluate the potential effect of economic and financial conditions on the earnings, losses and a capital of a covered bank over a nine-quarter planning horizon, taking into account the current condition of the bank and its risks, exposures, strategies and activities.
According to a release by the FDIC, the public summary would have to include “projections of losses, pre-provision net revenue, loss reserves, net income, and pro forma capital levels and ratios over the planning horizon under each scenario, and a general description of the risks covered and stress-testing methodologies used.”
The FDIC will be accepting comments on the proposal regarding the feasibility of the stress tests, proposed timelines and challenges institutions may face by March 23.