The Federal Reserve today proposed several changes to the Dodd-Frank Act-mandated stress tests for banks with more than $10 billion in assets. Starting with the 2016 testing cycle, the proposal would remove the requirement to calculate a Tier 1 common capital ratio, which is expected to be superseded by the common equity Tier 1 capital ratio under Basel III.
For bank and S&L holding companies with between $10 billion and $50 billion in assets, the proposal would eliminate fixed assumptions about dividend payments for company-run stress tests. It would also delay the application of stress testing for S&LHCs for one year.
For banks subject the advanced approaches capital framework, the proposal would delay the incorporation the supplementary leverage ratio for one year, to 2017, and “indefinitely” defer the use of the advanced approaches risk-weighted assets in stress testing. Comments are due by Sept. 24. For more information, contact ABA’s Hugh Carney.