The Federal Deposit Insurance Corporation (FDIC) has released the hypothetical economic scenarios that will be used for stress testing large financial institutions in 2026. These scenarios are intended for banks and savings associations with total consolidated assets exceeding $250 billion.
This requirement stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which mandates that certain financial companies perform regular stress tests. In 2018, Congress raised the threshold for what qualifies as a covered institution from $10 billion to $250 billion in assets.
According to the FDIC, “The supervisory scenarios include baseline and severely adverse scenarios. The baseline scenario is in line with a survey of private sector economic forecasters. The severely adverse scenario is not a forecast, rather, it is a hypothetical scenario designed to assess the strength and resilience of financial institutions. Each scenario includes 28 variables—such as gross domestic product, the unemployment rate, stock market prices, and interest rates—covering domestic and international economic activity.”
The agency developed these scenarios in coordination with both the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency.
