Agencies Grant S. 2155 Stress Testing Exemption to All Institutions Under $100B

Thanks to a joint statement by the federal banking agencies today, the Dodd-Frank Act-mandated company-run stress tests have been ended for banks, as well as bank holding companies, with less than $100 billion in assets. Under S. 2155, the ABA-backed regulatory reform law enacted in May, BHCs with less than $100 billion were immediately exempted from company-run stress tests and other enhanced prudential standards, but not banks.

However, banks with less than $250 billion in assets will receive stress test relief under S. 2155 no later than 18 months after passage. “[T]o avoid unnecessary burden for depository institutions and to maintain consistency between BHCs and depository institutions,” the banking agencies said that they would use their authority to delay the deadline for regulatory requirements connected to stress testing for banks and savings and loan holding companies with less than $100 billion in assets until Nov. 25, 2019. At that point, the 18-month period would have passed and statutory exemptions will be in effect.

“Today’s action will spare many banks from having to participate in stress tests that both regulators and banks have said provided little value and only distracted from more effective safety and soundness tools,” said ABA President and CEO Rob Nichols. “Instead of a one-size-fits-all approach, regulators are now bringing us closer to a program of tailored supervision in stress testing, which will allow banks to devote more of their time and resources to serving their customers and communities and helping grow the U.S. economy.”

In a separate statement, the Fed announced that it will not collect assessments from BHCs and S&LHCs with under $100 billion in assets for the year 2018 and forward. The Fed also said it will not require BHCs with less than $100 billion in assets to comply with certain regulatory requirements connected to enhanced prudential standards under Regulations Y, WW and YY.