H.R. 5270: Stress Testing Accountability and Transparency Act

The bill, known as the Stress Testing Accountability and Transparency Act, aims to enhance the process and transparency surrounding stress testing for banks and financial institutions. Here is a summary of the main provisions of the bill:

Rulemaking for Stress Capital Buffer Requirements

The bill requires the Board of Governors of the Federal Reserve System (the Board) to create rules that outline the methodologies and assumptions used to determine the stress capital buffer requirement for bank holding companies. Key points include:

• The Board must issue these rules within 90 days of the bill's enactment.
• Any changes to these rules must go through a public notice and comment process.
• The bill mandates that there be no double-counting of capital requirements for risks considered in both the stress capital buffer and risk-based capital requirements.

Rulemaking Related to Stress Testing

Beginning in the year after the bill is enacted, the Board is required to establish rules for each scenario used in stress tests under the Financial Stability Act of 2010. The main considerations are:

• The Board must issue a rule at least 30 days before any stress test is conducted.
• The bill prohibits the Board from applying climate-related stress tests to nonbank financial companies.

Government Accountability Office (GAO) Report

The legislation mandates that the Comptroller General of the United States must conduct a study and submit a report to Congress every three years regarding the stress tests conducted by the Board. The report will evaluate:

• The effectiveness of the stress tests in assessing the safety and soundness of nonbank financial institutions subject to these tests.
• The overall stability of the United States financial system.

Conclusion

The bill focuses on improving the transparency and accountability of the stress testing process for financial institutions, ensuring that appropriate methodologies are in place, and assessing the impact of these tests on both individual institutions and the broader financial system.

Relevant Companies

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