FRB Vice Chair Proposes Modifications To Stress Testing Program Proposal

Federal Reserve Board ("FRB") Vice Chair for Supervision Randal K. Quarles proposed modifying the FRB's large stress testing regime in response to industry feedback.

As previously covered, the FRB requested comments on a proposal that would revise the capital and stress test rules for bank-holding companies with more than $50 billion in total consolidated assets. The original proposal was intended to establish a "stress capital buffer" ("SCB") requirement for large banking organizations, with the goal of producing a "tailored and risk-sensitive capital regime."

In response to industry concerns, Mr. Quarles recommended removing certain redundant elements and introducing "two new co-equal options." First, he indicated that the stress leverage buffer requirement could be removed. Instead, the FRB would continue using existing leverage ratios, which provide a "sufficient backstop to the risk-based capital requirements." Additionally, he expressed support for