WASHINGTON The Federal Reserve Board will release the results of the latest round of stress testing exercises of the largest U.S. banks next month, the agency said Tuesday.
The central bank will release two sets of results: one required by the Dodd-Frank Act on March 20, and a second evaluation, known as the Comprehensive Capital Analysis and Review, on March 26. Each will be made public at 4:00 p.m. EDT.
Stress tests required under Dodd-Frank are meant to be forward-looking exercises that help the Fed determine whether a financial institution has sufficient capital during times of stress over a nine-quarter period.
The CCAR, which is also conducted by the central bank, assesses whether financial institutions have robust capital planning processes in place that can anticipate unique risks to the firm and are backed by sound risk-measurement and risk-management practices.
As part of the annual exam, the Fed also evaluates the company's plan to distribute capital, such as dividends or stock repurchases, and has the ability to reject a firm's capital plan.
In November, the Fed announced that it was expanding its annual stress test exercise to 30 U.S. institutions.
A dozen financial institutions including Comerica (CMA), Huntington Bancshares (HBAN) , M&T Bank (MTB), Northern Trust (NTRS), Discover Financial Services (DFS) and Zions Bancorp. (ZION) have now been added to the Fed's roster along with 18 of the other largest bank holding companies, which have previously been subject to the test.
Unlike last year, the Fed has added a few twists given its ongoing concern tied to securities financing transactions. The agency decided to test against the likelihood of a counterparty default among the eight largest firms, including JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup.
Fed officials have also warned that this year's post-stress test capital ratios would be affected by banks' having to comply with Basel III capital requirements, which take in effect in 2015 and will be part of the transition over the two-year horizon in next year's exercise.