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Dodd-Frank Act Stress Test (Company-Run)

Purpose

Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) requires national banks and federal savings associations with total consolidated assets of more than $10 billion to conduct annual stress tests. On October 9, 2012, the OCC published its final annual stress test rule (12 CFR 46), which set out definitions and rules for scope of application, scenarios, reporting, and disclosure. On December 3, 2014, the OCC published final rules to adjust the timing of the annual stress testing cycle and to clarify the method used to calculate regulatory capital in the stress tests. Beginning in 2016, all covered institutions, as defined in the final rule, with between $10 and $50 billion in assets are required to submit the results of their company-run stress tests to the OCC by July 31 and publish those results between October 15 and October 31. Covered institutions with $50 billion in assets or more are required to submit the results of their company-run stress tests to the OCC by April 5 and publish those results between June 15 and July 15. The OCC will provide the required scenarios to the covered institutions by February 15 of each year.

The results of the company-run stress tests provide the OCC with forward-looking information used in bank supervision and will assist the agency in assessing the company’s risk profile and capital adequacy. The objective of the annual company-run stress test is to ensure that institutions have robust, forward-looking capital planning processes that account for their unique risks, and to help ensure that institutions have sufficient capital to continue operations throughout times of economic and financial stress. The OCC intends to use the data to assess the reasonableness of the stress test results and determine whether additional analytical techniques are needed to identify, measure and monitor risk. These stress test results are also expected to support ongoing improvement in a covered institution’s stress testing practices with respect to its internal assessments of capital adequacy and overall capital planning.

Scenarios

Beginning in 2016, the OCC will release economic and financial market scenarios that are used in the annual company-run stress test under the Dodd-Frank Act no later than February 15. The scenarios include baseline, adverse and severely adverse scenarios. Each scenario includes economic variables, including macroeconomic activity, unemployment, exchange rates, prices, incomes and interest rates. The adverse and severely adverse scenarios are not forecasts, but rather hypothetical scenarios designed to assess the strength and resilience of financial institutions. Note that the scenarios are expected to be the same for both the $50 billion or more and $10 billion to $50 billion size institutions.

Reporting Templates

These reporting templates collect quantitative projections of balance sheet, capital, losses, and income across three or more macroeconomic scenarios, along with qualitative information on methodologies.

Covered institutions are required to complete reporting templates using financial information as of December 31 each year. For 2017, the OCC has proposed the following changes to the templates and instructions:

Institution Size Templates Instructions Scenarios

$50B or more

.zip
(proposed)

.zip
(proposed)

By February 15th, 2017

$10B to $50B

TBD

TBD

TBD

Click here for 2016 DFAST14A (over $50B) technical instructions.

Click here for 2016, 2015 and 2014 DFAST templates, instructions, and scenarios.

The $10 billion to $50 billion covered institutions will be required to complete the following templates:

  • OCC DFAST 10-50 Results Template
  • OCC DFAST 10-50 Scenario Variables Template

Applicability

Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public law 111-203, 124 Stat. 1376, July 2010) requires covered institutions to conduct annual stress tests in accordance with regulation issued by the OCC. The implementing regulation (12 CFR 46) required a covered institution with $50 billion or more in average total consolidated assets to conduct its first stress test under the rule using financial data as of September 30, 2012. The implementing regulation (12 CFR 46) required a covered institution with $10 billion to $50 billion in average total consolidated assets to conduct its first stress test using financial data as of September 30, 2013.

The amended rule published December 3, 2014 requires a national bank or federal savings association that becomes a covered institution, as defined in 12 CFR 46.2, after March 31, 2014 and on or before March 31, 2015 to conduct its first annual stress test using financial information as of December 31, 2015. A national bank or federal savings association that becomes a covered institution on or before March 31 of a given year (after 2014) shall conduct its first annual stress test under this part in the next calendar year after the date the national bank or federal savings association becomes a covered institution. A national bank or federal savings association that becomes a covered institution after March 31 of a given year (after 2014) shall conduct its first annual stress test under this part in the second calendar year after the date the national bank or federal savings association becomes a covered institution.

As defined in the Annual Stress Test rule, the measurement of average total consolidated assets is calculated as the average of the covered institution’s total consolidated assets, as reported on the Call Reports, for the four most recent consecutive quarters. If a covered institution has not filed a Call Report for each of the four most recent consecutive quarters, the average total consolidated assets is calculated as the average of the institution’s total consolidated assets, as reported on the Call Reports, for the most recent one or more consecutive quarters. National banks and federal savings associations become subject to the annual stress testing requirement on the “as of” date of the most recent Call Report used in the calculation of the average.

A national bank or federal savings association that migrates from a $10 to $50 billion covered institution to $50 billion or more covered institution shall be subject to the stress test requirements applicable to $50 billion or more covered institution immediately as of the date the national bank or federal savings association satisfies the size threshold for $50 billion or more covered institution, as defined in 12 CFR 46.2.

Disclosure of Annual Stress Test Results

The Annual Stress Test rule (12 CFR 46.8) requires the covered institutions to publish a summary of the results of its annual stress tests. The required summary of results may be published on the covered institution’s web site or in any other forum that is reasonably accessible to the public.

  • $50 billion or more covered institution: Effective January 1, 2016, $50 billion or more covered institution must publish a summary of the results of its annual stress test in the period starting June 15 and ending July 15 (for the stress test cycle beginning January 1, 2016, and for all stress tests thereafter). Unless the OCC determines otherwise, if the $50 billion or more covered institution is a consolidated subsidiary of a bank holding company or savings and loan holding company subject to supervisory stress tests conducted by the Board of Governors of the Federal Reserve System pursuant to 12 CFR part 252, then within the June 15 to July 15 period such covered institution may not publish the required summary of its annual stress test earlier than the date that the Board of Governors of the Federal Reserve System publishes the supervisory stress test results of the covered bank's parent holding company.
  • $10 to $50 billion covered institution: Effective January 1, 2016, a $10 to $50 billion covered institution must publish a summary of the results of its annual stress test in the period starting October 15 and ending October 31 (for the stress test cycle beginning January 1, 2016, and for all stress tests thereafter).

OCC Finalizes Amendment to Annual Stress Test Rule

On July 1, 2014, the OCC proposed to adjust the timing of the annual stress testing cycle and to clarify the method used to calculate regulatory capital in the stress tests. On December 3, 2014, the OCC adopted the proposed rule as final. The final rule shifts the dates of the annual stress testing cycle by approximately three months.

Related Links

Date Issued Subject/Title
November 16, 2016 (Over $50B Proposed Reporting Template and Instructions) Revision of an Approved Information Collection; Comment Request; Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions with Total Consolidated Assets of $50 Billion or More under the Dodd-Frank Wall Street Reform and Consumer Protection Act
March 30, 2016

($10-$50B Final Reporting Template and Instructions) Agency Information Collection Activities; Revision of an Approved Information Collection; Submission for OMB Review; Annual Company-Run Stress Test Reporting Template and Documentation for Covered Institutions with Total Consolidated Assets of $10 Billion to $50 Billion under the Dodd-Frank Wall Street Reform and Consumer Protection Act

October 20, 2015

($10B to $50B Proposed Reporting Template and Instructions)
Agency Information Collection Activities; Proposed Revision; Comment Request; Annual Company-Run Stress Test Reporting Template and Documentation for Covered Institutions With Total Consolidated Assets of $10 Billion to $50 Billion Under the Dodd-Frank Wall Street Reform and Consumer Protection Act

December 3, 2014 Amended Final Rule on Annual Stress Test
March 5, 2014 ($10B to $50B Guidance) Final Supervisory Guidance on Implementing Dodd-Frank Act Company-Run Stress Tests for Banking Organizations with Total Consolidated Assets of more than $10 Billion but less than $50 Billion
October 28, 2013 Final Policy Statement on the Principles for Development and Distribution of Annual Stress Test Scenarios

OMB Control No. 1557-0311 (Over $50B)
Expiration Date: 3/31/17

OMB Control No. 1557-0319 ($10B-$50B)
Expiration Date: 12/31/16