You aren't the only one that will be stressed this holiday season.

In what has become an annual event, for the next month financial institutions will be finalizing stress tests mandated by the Dodd-Frank Act and must submit their capital plans to regulators by Jan. 7.

The Federal Reserve recently detailed parameters of its 2013 Comprehensive Capital Analysis and Review (CCAR) and the Capital Plan Review (CapPR) for bank holding companies with $50 billion or more in total consolidated assets. It detailed hypothetical scenarios (baseline, adverse and severely adverse) that will be used to assess the strength and resilience of the nation's largest banks, as well as their ability to continue to meet the credit needs of individuals and businesses during stressful economic conditions or a financial crisis.

Due to their high volume of trading activity, Bank of America Corp, Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan Chase, and Wells Fargo will also be assessed for their ability to weather an international financial crisis this year.

This marks the fifth round of bank stress tests since 2009, as mandated by the Dodd-Frank Act. The periodic tests monitor the financial stability of the banks under hypothetical stressful situations. These institutions are covered under the Fed's Comprehensive Capital Analysis and Review (CCAR), and the. The stress tests

All scenarios start in the fourth quarter of 2012 and extend through the fourth quarter of 2015 and are built upon 26 variables, including economic activity, unemployment, and interest rates. Unique to this year is that banks will have a chance for a “do-over,” an opportunity to adjust their capital plans if they don't initially pass muster.

Baseline Scenario

The baseline scenario used for stress tests represents the expectations of private-sector forecasters, with a moderate expansion in economic activity. With it, real GDP increases, on average, 2.75 percent per year and the unemployment rate falls slowly to 6.75 percent by the end of 2015. The Consumer Price Index increases, on average, about 2.25 percent per year. Short-term Treasury rates remain near zero through 2013 before reaching nearly 2 percent by year-end 2015. Long-term Treasury yields move up steadily to 4 percent by the end of 2015.

Adverse Scenario

In this scenario, weakening economic activity is accompanied by a sudden rise in domestic inflation that brings about an equally rapid rise in short- and long-term interest rates. A moderate recession begins in the fourth quarter of 2012 and lasts until early 2014. The level of real GDP declines 2 percent and the unemployment rate rises to 9.75 percent. CPI inflation picks up considerably, reaching 4 percent by the middle of 2013. Equity prices fall 25 percent by the middle of 2013.

Short-term interest rates rise quickly, reaching 2.5 percent by the end of 2013, and corporate borrowing rates move to more than 7 percent.  by the end of 2013, despite only a modest increase in spreads. The unemployment rate reaches 10 percent at the end of 2015.

The international component of the scenario features recessions in the euro area, United Kingdom (also hit by deflation), and Japan. The yen, the pound, and the currencies of the developing economies of Asia appreciate sharply as foreign investors reduce their exposures to dollar denominated assets.

Severely Adverse Scenario

This scenario involves a severe recession in the U.S., with the unemployment rate increasing to 12 percent. Real GDP declines nearly 5 percent and equity prices fall more than 50 percent. House and commercial real estate prices decline more than 20 percent by the end of 2014 while short-term interest rates remain near zero through 2015.

Overseas, there are recessions in the euro area, the United Kingdom, and Japan.

OCC Issues Interim Guidance

Also last week, the Office of the Comptroller of the Currency released interim guidance describing how it will coordinate with the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation to develop and distribute its stress testing scenarios.

The interim guidance is effective immediately, with the ability to comment within 60 days of publication in the Federal Register.

Institutions with consolidated assets between $10 billion and to $50 billion are not subject to the stress test requirements under the rule until 2013.

On Oct. 9, the OCC published its final annual stress test rule, setting out definitions and rules for scope of application, scenarios, reporting, and disclosure.

The guidance is contained in OCC Bulletin 2012-33, “Community Bank Stress Testing: Supervisory Guidance.” It provides additional clarity around the expectations for community banks and provides an example of a simple stress test framework to consider.

Report templates and information on the methodologies used can be found here.