Stress Testing: Is Now the Time to Move the Goal Post? | Perspectives & Events | Mayer Brown

2Fed to Consider Performance Through Pandemic in Stress Tests, ABA Banking Journal (Apr. 10, 2020).

3E.g., 85 Fed. Reg. at 15,577 (“although the capital plan rule and the capital rule share similar goals, they were developed separately, and this has led to certain significant redundancies in the Board’s capital framework”).

4 Randal Quarles, Early Observations on Improving the Effectiveness of Post-Crisis Regulation (Jan. 19, 2018) (“the number I come up with is 24 total requirements in the framework”).

5 83 Fed. Reg. 18,160 (Apr. 25, 2018).

6 84 Fed. Reg. 59,032 (Nov. 1, 2019); 84 Fed. Reg. 59,283 (Nov. 1, 2019). The SCB rule also indicates that the Board intends to propose at a future date modifications to further simplify and increase the transparency of the stress testing regime but remains concerned that such changes could increase the risk of organizations “window dressing” test results.

7 The SCB rule does not modify the capital conservation buffer requirement under the advanced approaches.

8 The Board extended the deadline for submitting one element of the stress testing results from April 6, 2020, to May 11, 2020. This extension did not affect the timely submission of most of the stress testing results, and the Board indicated that it would not affect its determinations. See 85 Fed. Reg. 17,723, 17,727 n.9 (Mar. 31, 2020).

9 Press Release, Federal Reserve Board announces it will limit the use of the ‘qualitative objection’ in its Comprehensive Capital Analysis and Review (CCAR) exercise, effective for the 2019 cycle (Mar. 6, 2019).

10 12 C.F.R. § 225.8(f)(2).

11 Each banking organization’s stress capital buffer requirement will be set by the Board each year by June 30 and become effective on October 1.

12 The Board recognized in the SCB rule that this timing means the results of the company-run and supervisory stress tests will not be comparable in 2020.


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