Medium-sized banks may get a temporary reprieve from new “stress test” requirements called for under the 2010 financial regulatory overhaul, the Federal Reserve announced Monday.
The Fed said it is considering delaying, until September 2013, implementation of the stress tests for financial institutions with total consolidated assets between $10 billion and $50 billion.
Currently, banks are set to begin the stress tests upon finalization of a Fed proposal released in December 2010. But federal regulators have struggled to implement the Dodd-Frank law(PL 111-210), with dozens of rules aimed at toughening oversight now delayed.
In Congress, the law is a source of partisan disagreement, with Republicans arguing that it is a drag on the U.S. economy and Democrats charging the GOP wants to gut a law that was enacted after a financial industry meltdown.
Lawmakers required annual stress tests as part of the sprawling rewrite of financial laws in an effort to ensure that banks are healthy enough to withstand future economic downturns or financial crises.
But many banks say they are concerned they won’t be able to execute the tests and urged the central bank to delay its rule, which now seems a likely scenario.
“A number of commenters on the proposal raised concerns about the proposed timing of compliance with the company-run stress test requirements, specifically questioning if all institutions would have the resources, readiness and ability to conduct stress tests given the likely short period between publication of a final rule and the start of the stress testing process,” the Fed said in a written statement.
“The delay under consideration would help ensure that these companies have sufficient time to develop high-quality stress testing programs,” the statement said.
The Fed also said it is consulting with other banking regulators on the possible implementation delay and that the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation are considering similar steps.
Rep. Elijah Cummings, D-Md., right, hugs Harold Schaitberger, General President of the International Association of Fire Fighters, after the Congressman spoke at the IAFF's Legislative Conference General Session at the Hyatt Regency on Capitol Hill, March 9, 2015. The day featured addresses by members of Congress and Vice President Joe Biden.