The Federal Deposit Insurance Corp. (FDIC) Tuesday became the third federal banking regulator to issue its stress test scenarios for 2018 for certain financial institutions with more than $10 billion in assets.
According to the deposit insurance agency, the three economic scenarios – baseline, adverse and severely adverse – represent “key variables of economic activity.” The baseline scenario, the FDIC said, represents forecasts from private sector economists.
The adverse and severely adverse settings are not forecasts, the agency said. “Rather, they are hypothetical scenarios designed to assess the strength and resilience of financial institutions and their ability to continue to meet the credit needs of households and businesses under stressed economic conditions,” according to the FDIC.
The stress tests are required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). The FDIC said it coordinated with the Federal Reserve and the Office of the Comptroller of the Currency (OCC) in developing and distributing the scenarios