Dodd-Frank Stress Tests: Federal Banking Agencies Propose Company-Run Stress Test Data Reporting Templates and Related Documentation for Financial Institutions with Over $10 Billion but Less Than $50 Billion in Assets

Sullivan & Cromwell LLP - April 19, 2013

The Board of Governors of the Federal Reserve System (the “FRB”), the Office of Comptroller of the Currency (the “OCC”) and the Federal Deposit Insurance Corporation (the “FDIC”, and together with the FRB and the OCC, the “Agencies”) recently issued notices of proposed rulemaking concerning data collection and reporting requirements for bank holding companies, savings and loan holding companies and depository institutions with total consolidated assets of at least $10 billion but less than $50 billion (the “Covered Institutions”). These new reporting requirements are being proposed in connection with the company-run stress test requirements of Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).

The notices outline the reports and data that each Covered Institution would be required to provide to the Agency that is its applicable primary regulator in order to meet the Dodd-Frank stress test related reporting requirements. If the proposed requirements are adopted, Covered Institutions would be mandated to complete three templates reporting the results of their company-run stress tests, as well as their underlying assumptions and variables. The Agencies may use collected data to gauge the reasonableness of the stress test results of Covered Institutions and to provide forward-looking information to the Agencies regarding a Covered Institution’s capital adequacy. Although Covered Institutions are not subject to the FRB’s mandatory Comprehensive Capital Analysis and Review program (“CCAR”) because they fall under the CCAR $50 billion asset threshold, these notices appear to further underscore the Agencies’ view of the importance of the Dodd-Frank company-run stress tests and related data as part of their supervisory review and assessment of institutions’ capital adequacy and, by implication, the potential permissibility of planned dividends and other capital distributions.

Comments on the notices must be submitted by May 14, 2013 to the FRB, May 10, 2013 to the OCC and May 13, 2013 to the FDIC.