The FDIC, Federal Reserve Board, and OCC have released the economic scenarios that will be used by certain financial institutions with total consolidated assets of more than $10 billion for the upcoming round of stress tests required under the Dodd-Frank Act.
The economic scenarios include baseline, adverse, and severely adverse scenarios with variables that reflect economic activity, unemployment, exchange rates, prices, incomes, interest rates, and other salient aspects of the economy and financial markets.
The baseline scenario represents expectations of private-sector forecasters. The adverse and severely adverse scenarios are not forecasts. Rather, they are hypothetical scenarios designed to assess the strength and resilience of financial institutions, as well as their ability to continue to meet the credit needs of households and businesses in stressful economic and financial environments.
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