Fed reviewing stress test procedures
April 1, 2014 – The Federal Reserve this past weekend announced that it is reviewing the procedures of its stress tests, according to reports, which this year required 30 banks with more than $50 billion in assets to be tested to ensure they have sufficient capital to withstand an economic crisis.
The Federal Reserve issued a correction to the capital ratios in this year’s results on March 21. The correction did not affect which banks passed the exam and only minimally altered some of their capital ratios. Because of this correction, Reuters reported that the U.S. central bank could tweak its procedures of the stress tests going forward.
In October, NCUA’s board released a proposed rule for periodic stress testing by NCUA of credit unions with $10 billion or more in assets.
The rule would require federally insured credit unions with assets of $10 billion or more to submit to stress tests conducted by NCUA and to give NCUA capital plans each year. The four affected credit unions would be required to perform capital analyses, such as a sensitivity analysis to look at the effect of changes in variables, parameters and inputs on capital.
NAFCU is concerned about the purported benefits of the proposal relative to its costs. The proposal poses significant costs for the four affected credit unions, and, because the NCUSIF would bear the cost of NCUA stress testing, reduces the available funds to protect all credit unions. To NAFCU’s knowledge, all four of the covered credit unions already conduct and finance their own stress testing and capital planning.
NAFCU opposes the rule as drafted and urges against its adoption.
Federal Reserve statement
"Hunt: NCUA stress-test proposal is more burden with little benefit" 12/31/13
"Proposal calls for NCUA stress tests of big CUs" 10/25/13