The Federal Reserve last Wednesday finalized 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 rule — adopted largely as proposed in July — removes the requirement to calculate a Tier 1 common capital ratio, which is superseded by a fully phased-in common equity Tier 1 capital ratio under Basel III.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 final rule eliminates fixed assumptions about dividend payments for company-run stress tests. It also delays the application of stress testing for S&L HCs for one year, until 2017.
For banks subject to the advanced approaches capital framework, the final rule delays the incorporation of the supplementary leverage ratio for one year, to 2017, and “indefinitely” defers the use of the advanced approaches risk-weighted assets in stress testing.
