The Federal Reserve promotes a safe, sound, and efficient banking and financial system that supports the growth and stability of the U.S. economy through its supervision of bank holding companies (BHCs), U.S. intermediate holding company (IHC) subsidiaries of foreign banking organizations, savings and loan holding companies, and state member banks.
The Federal Reserve has established frameworks and programs for the supervision of the largest and most complex financial institutions to achieve its supervisory objectives, incorporating lessons learned from the 2007–09 financial crisis and in the period since. As part of these supervisory frameworks and programs, the Federal Reserve through its supervisory stress test assesses whether BHCs and U.S. IHCs with $100 billion or more in total consolidated assets (together, firms) are sufficiently capitalized to absorb losses during stressful conditions while meeting obligations to creditors and counterparties and continuing to be able to lend to households and businesses. The Federal Reserve Board first adopted rules implementing these frameworks and programs in October 2012 and most recently modified these rules in March 2020.1
Each year, the Federal Reserve publicly discloses the results of its supervisory stress test, as implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. This document includes the results of the Federal Reserve's December 2020 supervisory stress test for the capital plan resubmission, including revenues, expenses, losses, pre-tax net income, and capital ratios projected under adverse economic and financial conditions. These results are projected using a set of models developed or selected by the Federal Reserve that take as inputs the Federal Reserve's scenarios and firm-provided data on their financial conditions and risk characteristics.
1. On October 10, 2019, the Board finalized a rule to amend its prudential standards to exempt firms with total consolidated assets of less than $100 billion from the supervisory stress test and to subject certain firms with total consolidated assets between $100 billion and $250 billion to the supervisory stress test requirements on a two-year cycle (84 Fed. Reg. 59032 (Nov. 1, 2019)). Firms with $250 billion or more in total consolidated assets or material levels of other risk factors remain subject to the supervisory stress test requirements on an annual basis.
On March 4, 2020, the Board approved a rule to simplify its capital rules for large firms through the establishment of the stress capital buffer requirement, which integrates the Board's stress test results with its non-stress capital requirements (85 Fed. Reg. 15576 (Mar. 18, 2020)). Return to text