Banking and Finance Law Daily OCC adopts changes to stress testing thresholds, frequency
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Friday, October 4, 2019

OCC adopts changes to stress testing thresholds, frequency

By Charles A. Menke, J.D.

The final rule implements changes made EGRRCPA by increasing the minimum threshold for stress tests, while reducing the number of stress testing scenarios and the frequency.

The Office of the Comptroller of the Currency has issued a final rule that increases the minimum threshold for national banks and federal savings associations to conduct stress tests from $10 billion to $250 billion, revises the frequency of required stress tests for most national banks and FSAs from annual to biannual, and reduces the number of required stress testing scenarios from three to two. The final rule, which is consistent with changes made by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), takes effect Nov. 24, 2019.

The OCC adopted the final rule without change to its initial proposal. The agency noted it received two substantive comment letters in response to the initial proposal but determined that changes were not warranted.

One commenter requested that the OCC immediately eliminate stress testing requirements that would no longer be in effect upon finalization of the proposal or that are not appropriate for any firm of any size. "While EGRRCPA specifically provided an immediate effective date for bank holding companies with total consolidated assets of less than $100,000,000,000, it did not provide immediate relief for banks that have consolidated assets above the threshold or that meet certain other specified criteria," the OCC said. "Accordingly, the OCC did not consider it appropriate to eliminate this requirement from the 2019 stress tests."

The second commenter posited that the OCC should not reduce stress testing frequency annual to biennial for any subset of banks. According to the OCC, "biennial stress testing is appropriate under most conditions for a bank not consolidated under a holding company that is required to conduct a stress test annually." The OCC further stated that "annual stress testing is appropriate only for depository institution subsidiaries of the largest and most complex banking organizations."

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