The Office of the Comptroller of the Currency and Federal Reserve have released details on the scenarios they will use to stress tests on large financial institutions, with the latter adding 12 more banks to its examination roster.

The Dodd-Frank Act requires national banks and federal savings associations with total consolidated assets of more than $10 billion to conduct annual stress tests. On Oct. 9, 2012, the OCC published its final annual stress test rule, establishing that the information on the scenarios it uses will be provided to covered institutions by Nov. 15 of each year. The OCC scenarios include “baseline,” “adverse,” and “severely adverse” categories. Scenarios include spiking interest rates and unemployment numbers.

For its part, the Federal Reserve will examine 30 banks with more than $50 billion in assets as art of its Comprehensive Capital Analysis and Review, up from 18 banks examined in 2013. Among the institutions added to the list this year are BMO Financial; Discover Financial Services; HSBC North America Holdings; Northern Trust; RBS Citizens Financial Group; Santander Holdings USA; and Zions Bancorp.

Financial institutions submitting capital plans will be evaluated to ensure they have sufficient capital to continue to lend to households and businesses even under stressful conditions. In addition, they must incorporate the transition requirements from the recently finalized Basel III capital standards into their stress tests and capital plans.

The capital planning and stress testing program led by the Federal Reserve since the financial crisis has contributed to "a significant increase in capital" at the largest banks, it said in a statement. The 18 bank holding companies that have participated over the past four years increased their aggregate tier 1 common capital to $836 billion in the second quarter of 2013, the period of most recent data, from $392 billion in the first quarter of 2009. The tier 1 common ratio for these firms, which compares high-quality capital to risk-weighted assets, has more than doubled during that time.

All 30 of the companies in the CCAR in 2014 must submit their capital plans on or before Jan. 6, 2014.

The OCC also issued its final “Policy Statement on the Principles for Development and Distribution of Annual Stress Test Scenarios.” It outlines how the agency will gather information on banks' material vulnerabilities and risks as it coordinates with the Federal Reserve and the Federal Deposit Insurance Corporation to craft stress test scenarios each year. More details on the OCC's 2014 stress tests can be found here.

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