The U.S. Federal Reserve Board said Monday that 18 large U.S. bank holding companies will have to submit the results of their mid-year stress tests to the Fed on July 5, and to publicly release the results in September.
Regulatory reforms in the wake of the financial crisis require that large financial institutions that are under Fed supervision conduct two stress tests each year. In the mid-year test, which is being conducted for the first time this year, each firm develops its own baseline, adverse, and severely adverse scenarios to best reflect its individual operations and risks. This differs from the annual stress tests, which uses scenarios developed by the Fed.
Each firm in these new mid-year tests is required to release the results produced under its severely adverse scenario between September 15 and September 30, the Fed said Monday, adding that this is designed to help “promote market discipline and understanding of the financial conditions and risks of individual firms.”
“The midyear stress tests mark another important step in the Federal Reserve’s work in ensuring that large financial firms have robust capital planning processes and adequate capital so that they can continue to lend to households and businesses even during adverse economic and financial circumstances,” it says, adding that supervisors will incorporate the midyear stress tests into their ongoing assessment of the firms.