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Observers expressed alarm over Monday's announcement that Bank of America submitted incorrect information to the Federal Reserve Board for its stress tests, saying it raises doubts about the credibility of the test.
April 28 -
The Federal Reserve Board denied the capital plans of Citigroup, HSBC, RBS Citizens, Santander and Zions in its second round of stress tests this year.
March 26
WASHINGTON The Federal Reserve Board on Thursday proposed changes to the capital planning and stress testing process, including revising its start date.
The changes would offer banks an additional three months to undertake the effort, beginning now on Jan. 1.
The annual check-up, which has previously begun on Oct. 1, had required banks with more than $50 billion of assets to submit their capital plans and yearly company-run stress test results by early January using data from the end of the third quarter. But this deadline proved problematic, the Fed said.
"This timing obligates these companies to conduct company-run stress tests and complete annual capital plans at the end of the year, when companies are often resource-constrained due to other financial reporting requirements," according to the Fed's proposal. "The proposed rule would shift the timing by one calendar quarter, such that the capital plan and stress test cycles would begin January 1 and bank holding companies would be required to submit their capital plans and stress test results to the board by April 5."
The Office of the Comptroller of the Currency issued a similar proposal providing more time for its banks that are subject to the stress test requirements. The Federal Deposit Insurance Corp. is also expected to release a similar proposal for its banks covered by the requirement.
Under the Fed's proposal, mid-size banks with between $10 billion and $50 billion of assets would be required to submit their results by July 31. Savings and loan holding companies and state member banks that must undergo the Dodd-Frank stress tests would also be asked to submit their results several months later.
The new schedule would not take effect until the 2015-2016 capital plan and stress test cycles.
Additionally, the proposal makes a number of other changes, including modifying the capital plan to limit a large holding company's ability to make capital distributions if its actual issuances are less than the amount included in its capital plan.
The plan would also clarify the application of the rules to a subsidiary of a U.S. intermediate holding company that is part of a foreign bank organization.
"The enhanced prudential standards rule is silent on how the capital plan rule will apply to a subsidiary bank holding company with total consolidated assets of $50 billion or more prior to application of the stress test rules to the U.S. intermediate holding company," according to the Fed's proposal.
The proposal would clarify that a holding company that had to comply with the capital plan rule as of Sept. 30, 2015 and is a subsidiary of a U.S. intermediate holding company would continue to be subject to the capital plan rule until Jan. 1, 2018, the new effective date when foreign banks are subject to stress testing.
Comments are due by Aug. 11.
Under the OCC's proposal, institutions with over $50 billion in assets regulated by the agency would have until April 7 to submit their stress test results. OCC-supervised institutions with between $10 billion and $50 billion in assets would have until July 31. Comments are due in 60 days.
