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Monday, May 14, 2012

Regulators Issue Joint Stress-Test Guidance

The Federal Reserve Board, the OCC, and the FDIC have issued final supervisory guidance regarding stress-testing practices at banking organizations with total consolidated assets of more than $10 billion.
The guidance highlights the importance of stress testing at banking organizations as an ongoing risk management practice that supports a banking organization's forward-looking assessment of its risks and better equips it to address a range of adverse outcomes.

The guidance outlines general principles for a satisfactory stress testing framework and describes various stress testing approaches and how stress testing should be used at various levels within an organization.

The guidance also discusses the importance of stress testing in capital and liquidity planning and the importance of strong internal governance and controls as part of an effective stress-testing framework.
The agencies, in a separate press release, clarified that community banks are not required or expected to conduct the types of stress testing required of larger organizations.

Read the joint supervisory guidance.

Read the joint clarifying statement regarding community banks exemption.

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