Agencies Provide Context for Mid-Sized Bank Stress Test Results

With results from the Dodd-Frank Act-mandated stress tests for banks with $10-50 billion in assets set to be publicly disclosed for the first time later this month, the federal banking agencies yesterday issued a statement intended to place the disclosures in context. Having advocated for regulators to provide clarity to media and the public about how to interpret the stress test results, ABA welcomed the statement.

The statement makes clear that the stress tests for mid-sized banks are very different from those undergone by banks with more than $50 billion as part of the Comprehensive Capital Assessment and Review. Mid-sized banks are not required to submit annual capital plans subject to approval based on their stress test results.

The agencies also cautioned against comparing results among banks. “DFA stress test results may reflect distinctly different geographic markets, exposures, activities, methods, and assumptions across companies,” the agencies added. “Also, the DFA stress tests produce projections of hypothetical results and are not intended to be forecasts of expected or most likely outcomes.”