PART 325—STRESS TESTING Authority: 12 U.S.C. 5365(i)(2); 12 U.S.C. 5412(b)(2)(C); 12 U.S.C. 1818, 12 U.S.C. 1819(a)(Tenth), 12 U.S.C. 1831o, and 12 U.S.C. 1831p-1. Source: 77 FR 62424, Oct. 15, 2012, unless otherwise noted. § 325.1 Authority, purpose, and reservation of authority. (a) Authority. (b) Purpose. (c) Reservation of authority. (1) The Corporation may accelerate or extend any deadline for stress testing, reporting, or publication of the stress test results. (2) The Corporation may require different or additional tests not otherwise required by this part or may require or permit different or additional analytical techniques and methodologies, different or additional scenarios (including components for the scenarios), or different assumptions for the covered bank to use in meeting the requirements of this part. In addition, the FDIC may specify a different as-of date for any or all categories of financial data used by the stress test. (3) The Corporation may modify the reporting requirements of a report under this part or may require additional reports. The Corporation may modify the publication requirements of this part and or may require different or additional publication disclosures. (4) The Corporation may also exempt a covered bank from the requirement to conduct a stress test in a particular reporting year. (5) Factors considered: Any exercise of authority under this section by the Corporation will be in writing and will consider the activities, level of complexity, risk profile, scope of operations, and the regulatory capital of the covered bank, in addition to any other relevant factors. (6) Notice and comment procedures: In exercising its authority to require different or additional stress tests and different or additional scenarios (including components for the scenarios) under paragraph (c)(2) of this section, the Corporation will apply notice and response procedures in the same manner and to the same extent as the notice and response procedures in 12 CFR 324.5, as appropriate. (7) Nothing in this part limits the authority of the Corporation under any other provision of law or regulation to take supervisory or enforcement action, including action to address unsafe and unsound practices or conditions, or violations of law or regulation. [77 FR 62424, Oct. 15, 2012. Redesignated and amended at 83 FR 17740, Apr. 24, 2018; 84 FR 56933, Oct. 24, 2019; 84 FR 64985, Nov. 26, 2019] § 325.2 Definitions. For purposes of this part (a) Average total consolidated assets (b) Baseline scenario (c) Covered bank (d) Planning horizon (e) Pre-provision net revenue (f) Provision for credit losses (1) Until December 31, 2019: (i) With respect to a state nonmember bank or state savings association that has not adopted the current expected credit losses methodology under U.S. generally accepted accounting principles (GAAP), the provision for loan and lease losses as reported on the Call Report in the current stress test cycle; and, (ii) With respect to a state nonmember bank or state savings association that has adopted the current expected credit losses methodology under GAAP, the provision for loan and lease losses, as would be calculated and reported on the Call Report by a state nonmember bank or state savings association that has not adopted the current expected credit losses methodology under GAAP; and (2) Beginning January 1, 2020: (i) With respect to a state nonmember bank or state savings association that has adopted the current expected credit losses methodology under GAAP, the provision for credit losses, as reported in the Call Report in the current stress test cycle; and (ii) With respect to a state nonmember bank or state savings association that has not adopted the current expected credit losses methodology under GAAP, the provision for loan and lease losses as would be reported in the Call Report in the current stress test cycle. (g) Regulatory capital ratio (h) Reporting year (i) Scenarios (j) Severely adverse scenario (k) State nonmember bank state savings association (l) Stress test (m) Stress test cycle [77 FR 62424, Oct. 15, 2012, as amended at 79 FR 69368, Nov. 21, 2014. Redesignated at 83 FR 17740, Apr. 24, 2018, as amended at 84 FR 4249, Feb. 14, 2019; 84 FR 56933, Oct. 24, 2019] § 325.3 Applicability. (a) Covered banks subject to stress testing. (2) A state nonmember bank or state savings association that becomes a covered bank after December 31, 2019, shall conduct its first stress test under this part in the first reporting year that begins more than three calendar quarters after the date the state nonmember bank or state savings association becomes a covered bank, unless otherwise determined by the Corporation in writing. (b) Ceasing to be a covered bank. (c) Covered bank subsidiaries of a bank holding company or savings and loan holding company subject to periodic stress test requirements. (2) A covered bank that elects to conduct its stress test under paragraph (c)(1) of this section will remain subject to the same timeline requirements of its parent company until otherwise approved by the FDIC. [84 FR 56933, Oct. 24, 2019; 84 FR 64985, Nov. 26, 2019] § 325.4 Periodic stress tests required. Each covered bank must conduct the periodic stress test under this part subject to the following requirements: (a) Financial data. (b) Scenarios provided by the Corporation. (c) Significant trading activities. (d) Frequency. i.e., [84 FR 56934, Oct. 24, 2019] § 325.5 Methodologies and practices. (a) Potential impact on capital. (1) Pre-provision net revenues, losses, provision for credit losses, and net income; and (2) The potential impact on the regulatory capital levels and ratios applicable to the covered bank, and any other capital ratios specified by the Corporation, incorporating the effects of any capital action over the planning horizon and maintenance of an allowance for loan losses or adjusted allowance for credit losses, as appropriate, for credit exposures throughout the planning horizon. (b) Controls and oversight of stress testing processes. (2) The board of directors, or a committee thereof, of a covered bank must approve and review the policies and procedures of the stress testing processes as frequently as economic conditions or the condition of the covered bank may warrant, but no less than once every reporting year. The board of directors and senior management of the covered bank must receive a summary of the results of the stress test. (3) The board of directors and senior management of each covered bank must consider the results of the stress tests in the normal course of business, including but not limited to, the covered bank's capital planning, assessment of capital adequacy, and risk management practices. [77 FR 62424, Oct. 15, 2012. Redesignated and amended at 83 FR 17740, Apr. 24, 2018; 84 FR 4249, Feb. 14, 2019; 84 FR 56933, 56934, Oct. 24, 2019] § 325.6 Required reports of stress test results to the FDIC and the Board of Governors of the Federal Reserve System. (a) Report required for periodic stress test results. (b) Content of reports. (2) The description of aggregate losses and net income must include the cumulative losses and cumulative net income over the planning horizon, and the description of each regulatory capital ratio must include the beginning value, ending value, and minimum value of each ratio over the planning horizon. (c) Confidential treatment of information submitted. [84 FR 56934, Oct. 24, 2019] § 325.7 Publication of stress test results. (a) Publication date. (1) Unless the Corporation determines otherwise, if the covered bank is a consolidated subsidiary of a bank holding company or savings and loan holding company subject to supervisory stress tests conducted by the Board of Governors of the Federal Reserve System under 12 CFR part 252, then, within the June 15 to July 15 period, such covered bank may not publish the required summary of its periodic stress test earlier than the date that the Board of Governors of the Federal Reserve System publishes the supervisory stress test results of the covered bank's parent holding company. (2) If the Board of Governors of the Federal Reserve System publishes the supervisory stress test results of the covered bank's parent holding company prior to June 15, then such covered bank may publish its stress test results prior to June 15, but no later than July 15, through actual publication by the covered bank or through publication by the parent holding company under paragraph (b) of this section. (b) Publication method. (c) Information to be disclosed in the summary. (1) A description of the types of risks included in the stress test; (2) A summary description of the methodologies used in the stress test; (3) Estimates of aggregate losses, pre-provision net revenue, provision for credit losses, net income, and pro forma capital ratios (including regulatory and any other capital ratios specified by the FDIC); and (4) An explanation of the most significant causes for the changes in the regulatory capital ratios. (d) Content of results. (2) The disclosure of regulatory capital ratios and any other capital ratios specified by the Corporation under this section must include the beginning value, ending value, and minimum value of each ratio over the planning horizon. [77 FR 62424, Oct. 15, 2012, as amended at 79 FR 69369, Nov. 21, 2014. Redesignated at 83 FR 17740, Apr. 24, 2018, as amended at 84 FR 4249, Feb. 14, 2019; 84 FR 56934, Oct. 24, 2019; 84 FR 64985, Nov. 26, 2019]