(a) In general.
(1) The Board will conduct
an analysis of each covered company’s capital, on a total consolidated
basis, taking into account all relevant exposures and activities of
that covered company, to evaluate the ability of the covered company
to absorb losses in specified economic and financial conditions.
(2) The analysis will include an assessment
of the projected losses, net income, and pro forma capital
levels and regulatory capital ratios and other capital ratios for
the covered company and use such analytical techniques that the Board
determines are appropriate to identify, measure, and monitor risks
of the covered company.
(3) In conducting
the analyses, the Board will coordinate with the appropriate primary
financial regulatory agencies and the Federal Insurance Office, as
appropriate.
(4) In conducting the
analysis, the Board will not incorporate changes to a firm’s
business plan that are likely to have a material impact on the covered
company’s capital adequacy and funding profile in its projections
of losses, net income, pro forma capital levels, and capital
ratios.
(b) Economic and
financial scenarios related to the Board’s analysis. The
Board will conduct its analysis using a minimum of two different scenarios,
including a baseline scenario and a severely adverse scenario. The
Board will notify covered companies of the scenarios that the Board
will apply to conduct the analysis for each stress test cycle to which
the covered company is subject by no later than February 15 of that
year, except with respect to trading or any other components of the
scenarios and any additional scenarios that the Board will apply to
conduct the analysis, which will be communicated by no later than
March 1 of that year.
(c) Frequency
of analysis conducted by the Board.
(1) General. Except as provided in paragraph (c)(2) of this section, the Board
will conduct its analysis of a covered company according to the frequency
in Table 1 to section 238.132(c)(1).
Table 1 to section
238.132(c)(1)
| If the covered company
is a |
Then the Board will conduct its analysis |
| Category
II savings and loan holding company |
Annually |
| Category
III savings and loan holding company |
Annually |
| Category IV savings and loan holding company |
Biennially,
occurring in each year ending in an even number |
(2) Change in
frequency.
(i) The Board may conduct a stress test of a covered company on a
more or less frequent basis than would be required under paragraph
(c)(1) of this section based on the company’s financial condition,
size, complexity, risk profile, scope of operations, or activities,
or risks to the U.S. economy.
(ii) A Category IV savings and loan holding company may elect to
have the Board conduct a stress test with respect to the company in
a year ending in an odd number by providing notice to the Board and
the appropriate Federal Reserve Bank by January 15 of that year.
(3) Notice and response.
(i) Notification
of change in frequency. If the Board determines to change the
frequency of the stress test under paragraph (c)(2), the Board will
notify the company in writing and provide a discussion of the basis
for its determination.
(ii) Request for reconsideration and Board response. Within 14 calendar days of receipt of a notification under paragraph
(c)(2) of this section, a covered company may request in writing that
the Board reconsider the requirement to conduct a stress test on a
more or less frequent basis than would be required under paragraph
(c)(1) of this section. A covered company’s request for reconsideration
must include an explanation as to why the request for reconsideration
should be granted. The Board will respond in writing within 14 calendar
days of receipt of the company’s request.
