PART 1238—STRESS TESTING OF REGULATED ENTITIES Authority: 12 U.S.C. 1426; 4513; 4526; 4612; 5365(i). Source: 78 FR 59222, Sept. 26, 2013, unless otherwise noted. § 1238.1 Authority and purpose. (a) Authority. (b) Purpose. (2) This part establishes requirements that apply to each Enterprise's performance of periodic stress tests. The purpose of the periodic stress test is to provide the Enterprises, FHFA, and the FRB with additional, forward-looking information that will help them to assess capital adequacy at the Enterprises under various scenarios; to review the Enterprises' stress test results; and to increase public disclosure of the Enterprises' capital condition by requiring broad dissemination of the stress test scenarios and results. [85 FR 16529, Mar. 24, 2020] § 1238.2 Definitions. For purposes of this part, the following definitions apply: Planning horizon Scenarios Stress test [85 FR 16530, Mar. 24, 2020] § 1238.3 Annual stress test. (a) In general. (1) Shall complete an annual stress test of itself based on its data as of December 31 of the preceding calendar year; (2) The stress test shall be conducted in accordance with this section and the methodologies and practices described in § 1238.4 and in a supplemental guidance or order. (b) Scenarios provided by FHFA. [85 FR 16530, Mar. 24, 2020] § 1238.4 Methodologies and practices. (a) Potential impact. (1) Potential losses, pre-provision net revenues, and future pro forma capital positions over the planning horizon; and (2) Capital levels and capital ratios, including regulatory capital and net worth, and any other capital ratios specified by FHFA. (b) Planning horizon. (c) Additional analytical techniques. (d) Controls and oversight of the stress testing processes. (2) The board of directors, or a designated committee thereof, shall review and approve the policies and procedures established to comply with this part as frequently as economic conditions or the condition of the Enterprise warrants, but at least annually; and (3) Senior management of the Enterprise and each member of the board of directors shall receive a summary of the stress test results. [85 FR 16530, Mar. 24, 2020] § 1238.5 Required report to FHFA and FRB of stress test results and related information. (a) Report required for stress tests. (b) Content of the report for annual stress test. (c) Confidential treatment of information submitted. [85 FR 16530, Mar. 24, 2020] § 1238.6 Post-assessment actions by the Enterprises. Each Enterprise shall take the results of the stress test conducted under § 1238.3 into account in making changes, as appropriate, to the Enterprise's capital structure (including the level and composition of capital); its exposures, concentrations, and risk positions; any plans for recovery and resolution; and to improve overall risk management. If an Enterprise is under FHFA conservatorship, any post-assessment actions shall require prior FHFA approval. [85 FR 16530, Mar. 24, 2020] § 1238.7 Publication of results by regulated entities. (a) Public disclosure of results required for stress tests of the Enterprises. (b) Information to be disclosed in the summary. (1) A description of the types of risks being included in the stress test; (2) A high-level description of the scenario provided by FHFA, including key variables (such as GDP, unemployment rate, housing prices, and foreclosure rate, etc.); (3) A general description of the methodologies employed to estimate losses, pre-provision net revenue, and changes in capital positions over the planning horizon; (4) A general description of the use of the required stress test as one element in an Enterprise's overall capital planning and capital assessment. If an Enterprise is under conservatorship, this description shall be coordinated with FHFA; (5) Aggregate losses, pre-provision net revenue, net income, net worth, pro forma capital levels and capital ratios (including regulatory and any other capital ratios specified by FHFA) over the planning horizon, under the scenario; and (6) Such other data fields, in such form ( e.g., [85 FR 16530, Mar. 24, 2020] § 1238.8 Additional implementing action. The Director may, in circumstances considered appropriate, require any regulated entity not subject to this part to conduct stress testing hereunder; and from time to time, issue such guidance and orders as may be necessary to facilitate implementation of this part.