The federal banking agencies issued proposed guidance on July 30 that describes supervisory expectations for stress tests conducted by banking organizations with total consolidated assets between $10 billion and $50 billion. The Dodd-Frank Act and its implementing regulations require these medium-sized organizations to conduct annual stress tests beginning this fall. Comments on the proposed guidance will be due 60 days after it is published in the Federal Register, which is expected shortly.

     Nutter Notes: The stress test rules allow flexibility to accommodate different approaches by medium-sized banking organizations. According to the agencies, the proposed guidance is intended to help medium-sized banking organizations scale stress tests appropriately to their size, complexity, risk profile, business mix and market footprint. The proposed guidance includes examples of practices that would be consistent with supervisory expectations.