The Federal Deposit Insurance Corporation proposed regulations that would require banks with assets above $10 billion to conduct self-administered stress tests each year.
Under the proposal, the FDIC by mid-November each year would provide banks with three economic scenarios for the future. By Jan. 5, banks would send the FDIC a report on how the institution would cope with the scenarios. The reports would be published 90 days after that.
The rule closely tracks one proposed by the Federal Reserve last year that outlines how Fed examiners will administer stress tests to institutions with assets of more than $50 billion.
“Both the FDIC and the institutions being tested will benefit from the forward-looking results that the stress tests will provide,” acting FDIC Chairman Martin J. Gruenberg said. “The results will assist in ensuring an institution’s financial stability by helping to determine whether it has sufficient capital levels to withstand a period of economic stress.”
Richard Cordray, the director of the Consumer Financial Protection Bureau, voted for the proposal on stress tests in his first appearance on the FDIC board.
“Not only will they help protect consumer depositors but the system as a whole,” Cordray said at the meeting.
The FDIC will be taking public comments on the proposal for 60 days.