The Federal Reserve Board on Thursday issued a final policy statement describing the processes it will use to develop scenarios for future capital planning and stress testing exercises.
The policy statement will be used to develop scenarios for both annual supervisory and company-run stress tests. It describes the characteristics of the stress test scenarios and explains the procedures for formulating the scenarios. Although the policy statement is not effective until January 1, 2014, the macroeconomic scenarios released last week for the 2014 stress testing exercise are consistent with the policy statement.
Also on Thursday, the Federal Reserve issued revised macroeconomic scenarios for the 2014 capital planning and stress testing program to correct a minor computational error for the projections of the five-year Treasury yield in the baseline and adverse scenarios. The severely adverse scenario was unchanged. As the Federal Reserve has previously said, the adverse and severely adverse scenarios are hypothetical scenarios and not forecasts. The baseline scenario does not represent the forecast of the Federal Reserve.
For more information on the Federal Reserve's capital planning and stress testing program, go to www.federalreserve.gov/bankinforeg/stress-tests-capital-planning.htm.
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