FRB And OCC Release 2023 Stress Test Scenarios

The Federal Reserve Board ("FRB") and Office of the Comptroller of the Currency ("OCC") last week released their 2023 Dodd-Frank Act Stress Test ("DFAST") scenarios. As noted in the FRB's release, the "stress tests help ensure that large banks are able to lend to households and businesses even in a severe recession. The stress tests evaluate the financial resilience of large banks by estimating bank losses, revenues, expenses, and resulting capital levels − which provide a cushion against losses − under hypothetical recession scenarios into the future." The results of the DFAST tests help set large banking organizations' capital requirements, mainly through the stress capital buffer component of the regulatory capital requirements.