In an effort to clarify the supervisory expectations for stress testing of banking organizations, the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency jointly issued a statement today stating that the recently proposed initiatives relating to stress testing requirements at larger banking organizations, including recently proposed rules under the Dodd-Frank Act, are not applicable to banking organizations with less than $10 billion in assets.

To avoid any doubt about its application, the joint regulatory agencies specifically stated that community banks are not required or expected to conduct the enterprise-wide stress tests required of larger organizations under the proposed rules implementing Dodd-Frank Act stress testing requirements. In the process of clarifying the applicability of stress testing, the regulators did remind all community banks that they must still maintain the internal capacity to analyze the impact of adverse events on their financial condition even if they are not required to comply with the direct stress testing procedures applicable to larger banking organizations.