From the Regulators

The tests aim to assess whether financial institutions have sufficient capital to absorb losses and continue operating during stressful economic and financial conditions over a period of nine quarters

By James Langton |

The U.S. Federal Reserve Board announced Thursday that the results from the current round of supervisory stress tests will be released on June 23.

As well, the results from the accompanying comprehensive capital analysis and review (CCAR) exercise will be released on June 29.

The Fed's stress tests aim to assess whether financial institutions have sufficient capital to absorb losses and continue operating during stressful economic and financial conditions over a period of nine quarters. The results will include projected post-stress capital ratios, revenue, expense, and loss estimates under hypothetical economic scenarios (an adverse scenario, and a severely adverse scenario), the Fed says.

The CCAR exercise is designed to determine whether large bank holding companies have capital plans that adequately account for their unique risks, and are supported by the companies' risk-measurement and risk-management practices.

As part of these tests, the Fed evaluates each firm's plans to make capital distributions, such as dividend payments, stock repurchases, as well as planned acquisitions, and reveals whether or not it approves of the plans.

Canadian banking regulators do not publicly release the results of the stress tests they carry out with the big Canadian banks.