On June 21, 2018, the U.S. Board of Governors of the Federal Reserve System announced the results of the eighth and latest round of Dodd-Frank Act stress testing. Of the 35 bank holding companies that participated in this round of DFAST, which represent approximately 80% of the assets of all banks operating in the U.S., six were U.S. intermediate holding companies of non-U.S. financial institutions. Consistent with prior testing, this round of DFAST included both adverse and severely adverse scenarios. The severely adverse scenario simulated a severe global recession with U.S. unemployment rising by almost six percentage points to 10% along with a steepening Treasury yield curve. Federal Reserve Board Vice Chairman for Supervision Randal Quarles noted that under the severely adverse scenario, the simulated capital levels of the financial institutions that participated in this round of DFAST after the scenario are higher than the actual capital levels of large financial institutions in the years leading up to the financial crisis. In addition, consistent with the recently passed Economic Growth, Regulatory Reform and Consumer Protection Act, which provides that bank holding companies with less than $100 billion in total consolidated assets are no longer subject to DFAST or the Comprehensive Capital Analysis and Review process, the Federal Reserve Board announced that three financial institutions were not included in the most recent results and will not be subject to DFAST testing or the CCAR process in future cycles. The Federal Reserve Board will announce the results of the latest round of the CCAR process on June 28, 2018.
The full text of the 2018 DFAST Methodology and Results is available at: https://www.federalreserve.gov/publications/files/2018-dfast-methodology-results-20180621.pdf.
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