U.S. banking regulators are proposing guidance for stress tests by smaller banks, which are slated to start later this year.

The U.S. Federal Reserve Board, the Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency (OCC) are seeking comment on proposed guidance describing supervisory expectations for stress tests conducted by so-called medium-sized financial firms, which includes firms with total consolidated assets of between US$10 billion and US$50 billion.

The regulators note that these companies are required to conduct annual company-run stress tests beginning this fall. The new guidance aims to help these companies conduct tests that are “appropriately scaled to their size, complexity, risk profile, business mix, and market footprint.”

The stress test rules allow flexibility for these firms, to accommodate different approaches. Given this flexibility, the proposed guidance describes regulators’ general expectations for these stress tests; and, where appropriate, provides examples of practices that would be consistent with those expectations.

Comments on the proposed supervisory guidance are due by September 25.