The Federal Reserve Board ("FRB") and the OCC published their hypothetical economic and financial scenarios (see here and here) for banks to use in their annual stress tests.
According to the FRB, the stress tests are to be completed by 34 identified large banks with assets totaling more than $100 billion. The "baseline" scenario involves average projections from surveys of economic forecasters, and the "severely adverse" scenario involves a serious global recession where U.S. unemployment increases to ten percent and the corporate debt markets and commercial real estate experience elevated stress. The FRB noted that banks with large trading operations must include a global market shock component into their scenarios, and firms with significant trading or processing operations must incorporate a counterparty default scenario component.
Banks must submit their capital plans and stress test results by April 6, 2020. The FRB plans to announce the results of the supervisory stress tests on June 30, 2020.
Similarly, the OCC stated that its stress tests include baseline, adverse and severely adverse scenarios with economic variables (e.g., macroeconomic activity, unemployment, exchange rates, prices, and incomes and interest rates).
Covered institutions must submit their company-run stress tests by April 5, 2020.
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