Fed announces date for 2021 stress test results

WASHINGTON — The Federal Reserve announced Monday it will publish the results for both of its annual stress tests on June 24.

Nineteen of the biggest banks will be subjected to the Dodd-Frank Act Stress Tests and the Comprehensive Capital Analysis and Review examinations, plus four smaller firms that have chosen to opt in: BMO Financial Corp., MUFG Americas Holdings Corp., RBC U.S. Group Holdings and Regions Financial Corporation.

Under rules the Fed finalized in 2019, banks with assets of between $100 billion and $250 billion are only required to undergo stress tests every other year. However, those banks can choose to opt in to a stress tests in an “off year” if they wish to make changes to their capital distribution plans.

Banks subject to the stress tests are required to submit data from their balance sheets as of yearend 2020. The Fed tests those balance sheets against baseline and severely adverse scenarios.

This year’s round of tests are expected to provide another glimpse of how banks have weathered the coronavirus pandemic.

The harshest scenario banks will be tested against this cycle is elevated stress in the commercial real estate and corporate debt markets along with an intense global recession. In that severely adverse scenario, banks would have to account for a rise in the U.S. unemployment rate by 4 percentage points to 10.75%.

The Dodd-Frank Act Stress Test examines a bank’s balance-sheet performance under the scenarios using a standard capital management plan. Meanwhile, CCAR uses the bank’s own capital management plan to better assess how the bank might actually perform under the same conditions. Each test examines a bank’s performance over nine future consecutive quarters.

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