(a) In general.
(1) The Board will conduct
an analysis of each covered company’s capital, on a total consolidated
basis, taking into account all relevant exposures and activities of
that covered company, to evaluate the ability of the covered company
to absorb losses in specified economic and financial conditions.
(2) The analysis will include an assessment
of the projected losses, net income, and pro forma capital
levels and regulatory capital ratios and other capital ratios for
the covered company and use such analytical techniques that the Board
determines are appropriate to identify, measure, and monitor risks
of the covered company that may affect the financial stability of
the United States.
(3) In conducting
the analysis, the Board will not incorporate changes to a firm’s business
plan that are likely to have a material impact on the covered company’s
capital adequacy and funding profile in its projections of losses,
net income, pro forma capital levels, and capital ratios.
(b) Economic and financial
scenarios related to the Board’s analysis. The Board will conduct
its analysis using a minimum of two different scenarios, including
a baseline scenario and a severely adverse scenario. The Board will
notify covered companies of the scenarios that the Board will apply
to conduct the analysis for each stress test cycle to which the covered
company is subject by no later than February 15 of that year, except
with respect to trading or any other components of the scenarios and
any additional scenarios that the Board will apply to conduct the
analysis, which will be communicated by no later than March 1 of that
year.
(c) In conducting a stress test under this section, the
Board will make the following assumptions regarding a covered company’s
capital actions over the planning horizon:
(1) The covered company will not pay any
dividends on any instruments that qualify as common equity tier 1
capital;
(2) The covered company
will make payments on instruments that qualify as additional tier
1 capital or tier 2 capital equal to the stated dividend, interest,
or principal due on such instrument;
(3) The covered company will not make a redemption or repurchase
of any capital instrument that is eligible for inclusion in the numerator
of a regulatory capital ratio; and
(4) The covered company will not make any issuances of common stock
or preferred stock.
(d) Frequency of analysis conducted by the Board.
(1) General. Except as provided in paragraph (d)(2) of this section, the Board
will conduct its analysis of a covered company according to the frequency
in Table 1 to section 252.44(d)(1).
Table 1 to section
252.44(d)(1)
| If the covered company
is a |
Then the Board will conduct its analysis |
| Global
systemically important BHC |
Annually. |
| Category
II bank holding company |
Annually. |
| Category
II U.S. intermediate holding company |
Annually. |
| Category
III bank holding company |
Annually. |
| Category
III U.S. intermediate holding company |
Annually. |
| Category
IV bank holding company |
Biennially, occurring
in each year ending in an even number. |
| Category
IV U.S. intermediate holding company |
Biennially, occurring
in each year ending in an even number. |
| Nonbank financial company supervised by
the Board |
Annually. |
(2) Change in frequency.
(i) The Board may conduct a stress
test of a covered company on a more or less frequent basis than would
be required under paragraph (d)(1) of this section based on the company’s
financial condition, size, complexity, risk profile, scope of operations,
or activities, or risks to the U.S. economy.
(ii) A Category IV bank holding company
or Category IV U.S. intermediate holding company may elect to have the
Board conduct a stress test with respect to the company in a year
ending in an odd number by providing notice to the Board and the appropriate
Federal Reserve Bank by January 15 of that year. Notwithstanding the
previous sentence, such a company may elect to have the Board conduct
a stress test with respect to the company in the year 2021 by providing
notice to the Board and the appropriate Federal Reserve Bank by April
5, 2021.
(3) Notice and response.
(i) Notification
of change in frequency. If the Board determines to change the
frequency of the stress test under paragraph (d)(2)(i) of this section,
the Board will notify the company in writing and provide a discussion
of the basis for its determination.
(ii) Request for reconsideration and Board
response. Within 14 calendar days of receipt of a notification
under paragraph (d)(3)(i) of this section, a covered company may request
in writing that the Board reconsider the requirement to conduct a
stress test on a more or less frequent basis than would be required
under paragraph (d)(1) of this section. A covered company’s request
for reconsideration must include an explanation as to why the request
for reconsideration should be granted. The Board will respond in writing
within 14 calendar days of receipt of the company’s request.
