On Aug. 27, the Board of Governors of the Federal Reserve System ("Board") announced that it may allow midsized institutions to delay the implementation of the annual company-run stress test requirement mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") until September 2013.
Under a regulation proposed by the Board in December 2011, all bank holding companies, state member banks and savings and loan holding companies with $10 billion or more in total consolidated assets would need to conduct an annual company-run stress test as follows:
- By mid-November, the Board would publish the scenarios for the annual tests;
- By Jan. 5, institutions would be required to report the results of their annual tests to the Board (institutions with $50 billion or more in total consolidated assets would need to conduct two company-run stress tests each year, with the results of the second test due to the Board by July 5); and
- Within 90 days after submitting test results to the Board, the institution would be required to publicly disclose a summary of such results.
In January 2012, the Federal Deposit Insurance Corporation ("FDIC") proposed adopting an identical timeline for applying the Dodd-Frank company-run stress test requirements to state nonmember banks and state savings associations with $10 billion or more in total consolidated assets, as did the Office of the Comptroller of the Currency ("OCC") for national banks with $10 billion or more in total consolidated assets.
The timeline had been expected to begin this November for all institutions. The Board's Aug. 27 announcement was in response to concerns expressed in comments to the proposed regulation regarding whether institutions would have the resources, readiness and ability to conduct stress tests given the likely short period between publication of a final rule and the start of the stress testing process.
The delay under consideration by the Board would only affect bank holding companies, state member banks, and savings and loan holding companies with between $10 billion and $50 billion in total consolidated assets. However, if the Board does end up delaying the timeline for such institutions, we would expect the FDIC and OCC to follow suit with regard to similarly-sized state nonmember banks, state savings associations and national banks.