Stress Tests and Capital Planning

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Update

May 13, 2013

Federal Reserve Board announces that results of company-run, midyear stress tests are due on July 5

The Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act (DFA) stress tests are regulatory tools the Federal Reserve uses to ensure that financial institutions have robust capital planning processes and adequate capital. CCAR is an annual exercise by the Federal Reserve to ensure that the largest bank holding companies have sufficient capital to continue operations throughout times of economic and financial stress and robust, forward-looking capital planning processes that account for their unique risks. As part of the CCAR, the Federal Reserve evaluates institutions' capital adequacy, internal capital adequacy assessment processes, and their plans to make capital distributions, such as dividend payments or stock repurchases. DFA stress tests are forward-looking exercises conducted by the Federal Reserve and financial companies regulated by the Federal Reserve to help ensure institutions have sufficient capital to absorb losses and support operations during adverse economic conditions.

While CCAR and DFA stress tests are distinct exercises, capital planning and stress testing are complementary and frequently rely on similar processes, data, supervisory exercises, and requirements. The Federal Reserve coordinates these processes to reduce duplicative requirements and to minimize burden. As of September 30, 2012, 19 large bank holding companies participate in CCAR. DFA stress test requirements apply to a broader range of companies--bank holding companies, savings and loan companies, and state member banks with total assets greater than $10 billion and nonbank financial firms that are designated by the Financial Stability Oversight Council for supervision by the Federal Reserve.

*Note: The requirements, expectations, and activities relating to DFA stress testing and CCAR described above do not apply to any banking organizations with assets of $10 billion or less. Please see the Board's clarifying statement in this regard.