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From Banking and Finance Law Daily, November 16, 2015

OCC invites comments on revision of information collection on stress testing templates

By Stephanie K. Mann, J.D.

The Office of the Comptroller of the Currency has published a notice and request for comments on a revised information collection entitled “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.”

All comments must be received by Jan. 19, 2016.

Background. Section 165(i)(2) of the Dodd-Frank Act requires certain financial companies, including national banks and federal savings associations, to conduct annual stress tests and requires the primary financial regulatory agency of those financial companies to issue regulations implementing the stress test requirements. A national bank or federal savings association is a “covered institution” and subject to the stress test requirements if its total consolidated assets are more than $10 billion.

Under Section 165(i)(2), a covered institution is required to submit to the Federal Reserve Board and to its primary financial regulatory agency a report containing information required by the primary financial regulatory agency.

Revisions to collection. The OCC’s proposed revisions to the reporting templates for institutions with $50 billion in assets or more consist of adding data items, deleting data items, and redefining existing data items. The proposed changes are:

  • Bank-specific scenario: Covered institutions would be required to submit bank-specific baseline and stress scenarios and projections for 2017 and would have the option to do so for 2016.

  • Largest counterparty default: The largest trading covered institutions that also submit the Global Market Shock scenario would be required to assume the default of their largest counterparty in the supervisory severely adverse and adverse scenarios for 2017 and would have the option to do so for 2016.

  • Advanced approaches banks: (1) delay incorporation of the supplemental leverage ratio for one year; and (2) indefinitely defer the use of the advance approaches for stress testing projections.

  • Reporting Template and Supporting Documentation Changes: clarifying instructions, adding data items, deleting data items, and redefining existing data items. This includes an expansion of the information collected in the scenario schedule. The proposed revisions also include a shift of the as-of date in accordance with modifications to the OCC’s stress testing rule.

  • These revisions also reflect the implementation of the final Basel III regulatory capital rule. On July 9, 2013, the OCC approved a joint final rule that will revise and replace the OCC’s risk-based and leverage capital requirements to be consistent with agreements reached by the Basel Committee on Banking Supervision in ‘‘Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems’’ (Basel III). Accordingly, the proposed revisions would reflect the fact that institutions will no longer report items based on the pre-Basel III capital rules.

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