The FDIC and Office of the Comptroller of the Currency today released the market scenarios they will use in their upcoming stress tests for financial institutions. The agencies coordinated with the Federal Reserve to develop the scenarios, with the Fed releasing its scenarios last week.
The supervisory scenarios include baseline and severely adverse scenarios, according to the FDIC. The baseline scenario is in line with a survey of private sector economic forecasters. The severely adverse scenario is not a forecast. Instead, it a hypothetical scenario designed to assess the strength and resilience of financial institutions. Each scenario includes 28 variables — such as gross domestic product, the unemployment rate, stock market prices, and interest rates — covering domestic and international economic activity.
