OCC Updates Stress Testing Implementation Timeline

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today announced it is considering changes to the implementation timeline for the company-run stress testing required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The changes under consideration would delay implementation until September 2013 for covered institutions with total consolidated assets between $10 billion and $50 billion.

On January 24, 2012, the OCC published in the Federal Register a notice of proposed rulemaking to implement section 165(i) of the Dodd-Frank Act, which would require certain financial companies, including certain national banks and federal savings associations, to conduct annual stress tests in accordance with regulations prescribed by the OCC. In the notice of proposed rulemaking, the OCC stated that "[a] national bank or federal savings association that is a covered institution shall be subject to this part on [the effective date of the rule] and will conduct its first stress test under this part using financial statement data as of September 30, 2012, with results reported as required under this part in January 2013."

The OCC received a number of comments on the proposed immediate effective date identifying concerns about resources, readiness, and ability to conduct stress tests given the likely short period between publication of a final rule and the start of the stress-testing process. A key priority in implementing this section of the Dodd-Frank Act is to ensure that banks have robust systems and processes to conduct the stress tests. In response to the concerns expressed in comments, the OCC is considering delaying the effective date of the rule to conduct the annual stress tests for certain institutions. The proposed delay would help ensure that all covered institutions have sufficient time to develop sound stress testing programs.

Specifically, the OCC is considering a timeline under which covered institutions with assets from $10 to $50 billion would be required to conduct initial stress tests in accordance with the rule in late 2013. The OCC is considering requiring covered institutions with assets greater than $50 billion to begin conducting annual stress tests under the rule this year, although the OCC would maintain its reservation of authority to allow covered institutions above $50 billion to delay implementation on a case-by-case basis where warranted.

As part of efforts among the federal banking agencies to coordinate the implementation of Dodd-Frank stress test requirements, the OCC has consulted on this proposed implementation delay with the Federal Reserve Board (Board) and the Federal Deposit Insurance Corporation (FDIC). The Board and FDIC are considering similar changes to timelines included in their proposed rules implementing Dodd-Frank stress test requirements.

The final implementation timeline for all covered institutions will be specified in the final rule.

Related Link

• Notice of Proposed Rulemaking