Stress-Test Guidance|for Banks Proposed

WASHINGTON (CN) - Three federal agencies issued proposed guidelines for stress testing in financial institutions worth between $10 and $50 billion, and are soliciting comments on the guidance.

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, three agencies issued final rules last October that created stress test requirements for companies with assets over $10 billion, and wrote that they intended to publish guidance to assist companies worth between $10 and $50 billion.

The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency has issued proposed guidance that would apply to companies of that size.

Stress tests are exercises created to ensure that financial institutions like banks and other lenders have enough capital to take on losses in the face of economic crises and do not harm their communities and other institutions.

Under Dodd-Frank stress test rules, companies must assess the impact three different scenarios - baseline, adverse, and severely adverse - would have on their assets, using a number of variables.

"All $10-50 billion companies must consider the role of stress testing results in normal business including in the capital planning, assessment of capital adequacy, and risk management practices of the company," the agencies wrote. "For instance, a $10-50 billion company would be expected to ensure that its post-stress capital results are aligned with its internal capital goals and risk appetite."

The agencies seek comments on all parts of the proposed guidance, including comments about challenges to their businesses, and whether more clarification is needed about certain aspects of the regulation.

Comments on the guidance can be submitted before Sept. 30.

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