12 CFR § 46.6 - Stress test methodologies and practices.
(a) Potential impact on capital. During each quarter of the planning horizon, a covered institution shall estimate the following for each scenario required to be used:
(1) Pre-provision net revenues, losses, loan loss provisions, and net income, and
(2) The potential impact on the covered institution's regulatory capital levels and ratios applicable to the covered institution under 12 CFR part 3 and any other capital ratios specified by the OCC, incorporating the effects of any capital actions over the planning horizon and maintenance by the covered institution of an allowance for loan losses appropriate for credit exposures throughout the planning horizon.
(b) Planning horizon. A covered institution must use a minimum planning horizon of at least nine quarters, beginning with the first day of the period covered by the stress tests.
(c) Controls and oversight of stress test processes.
(1) The senior management of the covered institution must establish and maintain a system of controls, oversight, and documentation, including policies and procedures, designed to ensure that the stress test processes used by the covered institution satisfy the requirements in this part. These policies and procedures must, at a minimum, describe the covered institution's stress test practices and methodologies, and processes for validating and updating the covered institution's stress test practices and methodologies consistent with applicable laws, regulations, and supervisory guidance.
(2) The board of directors of the covered institution, or a committee thereof, shall approve and review the policies and procedures of the covered institution's stress testing processes as frequently as economic conditions or the condition of the institution may warrant, but no less than once every reporting year. The board of directors and senior management must be provided with a summary of the stress test results.