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H.R. 4293 (115th): Stress Test Improvement Act of 2017


The text of the bill below is as of Nov 7, 2017 (Introduced).

Summary of this bill

Source: Republican Policy Committee

H.R. 4293 improves the stress testing process for bank holding companies. Specifically, the bill improves the process by:

  • Requiring certain bank holding companies to conduct company-run stress tests once a year rather than semiannually;
  • Reduces the number of supervisory scenarios from three to two—the baseline and severely adverse scenario;
  • Does away with mid-year stress tests;
  • Prohibits the Federal Reserve from objecting to a bank holding company’s capital plan based on qualitative deficiencies.

The Federal Reserve (Fed) administers a set of “stress tests” to determine the ability of U.S. banks to withstand periods of economic turmoil. Title I of Dodd-Frank requires company-run stress tests for any (bank ...


I

115th CONGRESS

1st Session

H. R. 4293

IN THE HOUSE OF REPRESENTATIVES

November 7, 2017

introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To reform the Comprehensive Capital Analysis and Review process, the Dodd-Frank Act Stress Test process, and for other purposes.

1.

Short title

This Act may be cited as the Stress Test Improvement Act of 2017.

2.

CCAR and DFAST reforms

Section 165(i) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365(i)) is amended—

(1)

in paragraph (1)—

(A)

in subparagraph (B)—

(i)

by amending clause (i) to read as follows:

(i)

shall—

(I)

issue regulations, after providing for public notice and comment, that provide for at least 3 different sets of conditions under which the evaluation required by this subsection shall be conducted, including baseline, adverse, and severely adverse, and methodologies, including models used to estimate losses on certain assets, and the Board of Governors shall not carry out any such evaluation until 60 days after such regulations are issued; and

(II)

provide copies of such regulations to the Comptroller General of the United States and the Panel of Economic Advisors of the Congressional Budget Office before publishing such regulations;

;

(ii)

in clause (iv), by striking and at the end;

(iii)

in clause (v), by striking the period and inserting the following: , including any results of a resubmitted test;; and

(iv)

by adding at the end the following:

(vi)

shall, in establishing the severely adverse condition under clause (i), provide detailed consideration of the model’s effects on financial stability and the cost and availability of credit;

(vii)

shall, in developing the models and methodologies and providing them for notice and comment under this subparagraph, publish a process to test the models and methodologies for their potential to magnify systemic and institutional risks instead of facilitating increased resiliency;

(viii)

shall design and publish a process to test and document the sensitivity and uncertainty associated with the model system’s data quality, specifications, and assumptions; and

(ix)

shall communicate the range and sources of uncertainty surrounding the models and methodologies.

; and

(B)

by adding at the end the following:

(C)

CCAR requirements

(i)

Parameters and consequences applicable to CCAR

The requirements of subparagraph (B) shall apply to CCAR.

(ii)

Two-year limitation

The Board of Governors may not subject a company to CCAR more than once every two years.

(iii)

Mid-cycle resubmission

If a company receives a quantitative objection to, or otherwise desires to amend the company’s capital plan, the company may file a new streamlined plan at any time after a capital planning exercise has been completed and before a subsequent capital planning exercise.

(iv)

Limitation on qualitative capital planning objections

In carrying out CCAR, the Board of Governors may not object to a company’s capital plan on the basis of qualitative deficiencies in the company’s capital planning process.

(v)

Company inquiries

The Board of Governors shall establish and publish procedures for responding to inquiries from companies subject to CCAR, including establishing the time frame in which such responses will be made, and make such procedures publicly available.

(vi)

CCAR defined

For purposes of this subparagraph and subparagraph (E), the term CCAR means the Comprehensive Capital Analysis and Review established by the Board of Governors.

; and

(2)

in paragraph (2)(A), by striking semiannual and inserting annual.