Bank regulators on Tuesday are set to approve a plan for how banks with more than $10 billion in assets should conduct stress tests annually to determine whether they can withstand a financial shock.
The tests are required by the 2010 Dodd-Frank financial oversight law.
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The tests are intended to give banks and regulators a better idea of whether banks can weather a crisis and what steps they may have to take to strengthen their operations. The banks would run the tests under scenarios provided by regulators.
The proposal will be out for comment for 60 days and Federal Deposit Insurance Corp staff said it was not yet clear whether the first tests will be held in 2012 or 2013.
The FDIC board will vote on the proposal on Tuesday.
Under the proposal, regulators each year would provide banks with stress scenarios in November. The banks would run the testsand report back to regulators in January.
Banks would be required to publish the results of the tests 90 days after submitting them to regulators in January.
The proposed testing regime released on Tuesday is just one of a handful of tests banks are facing from regulators. The Federal Reserve is currently in the midst of evaluating whether banks with more than $50 billion in assets have strong enough capital positions to survive an economic downturn.
The Fed will use the results, expected in March, to decide whether banks can boost their dividend payments and whether they may have to raise more capital to satisfy regulators that theycan withstand a financial shock.