October 17, 2014
Federal Reserve Board issues final rule to modify regulations for capital planning and stress testing and released instructions for 2015 capital planning cycle
For release at 12:30 p.m. EDT
The Federal Reserve Board on Friday issued a final rule to modify the regulations for capital planning and stress testing and released instructions for the 2015 capital planning cycle.
The final rule adjusts the due date for bank holding companies (BHCs) with total consolidated assets of $50 billion or more to submit their capital plans and stress test results. For the 2015 capital plan cycle, these BHCs are required to submit capital plans on or before January 5, 2015, unchanged from prior years. For subsequent cycles, beginning in 2016, participating BHCs will be required to submit their capital plans and stress testing results to the Federal Reserve on or before April 5.
In addition to the timing change, the final rule includes modifications and clarifications to the existing capital plans and stress test rules. In particular, the final rule adopts the limitation on a BHC's ability to make capital distributions to the extent that the BHC's actual capital issuances are less than the amount indicated in its capital plan, with adjustments to address commenters' concerns. The final rule is largely identical to the proposed rule, with a few key adjustments, including certain technical revisions and clarifications made in response to comments from the public.
The final rule marks another step in the Federal Reserve's ongoing efforts to adapt and improve its capital planning and stress testing process as the program's fifth cycle begins.
"Born of necessity during the depths of the financial crisis as part of an effort to restore confidence in the U.S. financial system, supervisory stress testing has become a cornerstone of a new approach to regulation and supervision of the nation's largest financial institutions," Gov. Daniel K. Tarullo said. "If supervisory stress testing and the associated review of capital planning processes are to give regulators, banks, and the public a dynamic view of the capital positions of large financial firms, they must respond to changes in the economy, the financial system, and risk-management capabilities."
The Federal Reserve's capital planning and stress testing program includes the Comprehensive Capital Analysis and Review (CCAR) of large bank holding companies. The aim of the annual reviews is to ensure that large financial institutions have robust, forward-looking capital planning processes that account for their unique risks, and to help ensure that they have sufficient capital to continue operations throughout times of economic and financial stress. Capital is important to banking organizations, the financial system, and the economy broadly because it acts as a cushion to absorb losses and helps to ensure that losses are borne by shareholders, not taxpayers.
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 banking organizations in the United States. The 30 large BHCs that participated in CCAR last year have increased their aggregate tier 1 common capital to $971 billion as of the fourth quarter of 2013, from $460 billion as of the first quarter of 2009. The tier 1 common ratio for these firms has more than doubled during that time period to a weighted average of 11.1 percent from 5.3 percent.
Thirty-one large BHCs are participating in CCAR in 2015. All but one of those firms, Deutsche Bank Trust Corporation, participated in CCAR in 2014.
The instructions issued Friday for CCAR 2015 provide details regarding submission requirements, supervisory expectations for a capital adequacy process, and the supervisory assessments and disclosure. Further, for the first time, the instructions include a discussion of common strengths and shortcomings seen in the submissions by the participating BHCs in the prior year.
The instructions are being provided ahead of the supervisory scenarios this year to provide firms with additional time for implementation. The Federal Reserve intends to provide the supervisory scenarios as soon as it is possible to incorporate the relevant data on economic and financial conditions as of the end of the third quarter, but no later than November 15, 2014.
| Previous CCAR participants, also participants in 2015 | Participants new to CCAR in 2015 | Global market shock participants, 2015 | Counterparty default participants, 2015 |
|---|---|---|---|
|
Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation BB&T Corporation BBVA Compass Bancshares, Inc. BMO Financial Corp. Capital One Financial Corporation Citigroup Inc. Comerica Incorporated Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Inc. JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBS Citizens Financial Group, Inc. Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation SunTrust Banks, Inc. U.S. Bancorp Wells Fargo & Co. Zions Bancorporation |
Deutsche Bank Trust Corporation |
Bank of America Corporation Citigroup Inc. The Goldman Sachs Group, Inc. JPMorgan Chase & Co. Morgan Stanley Wells Fargo & Company |
Bank of America Corporation The Bank of New York Mellon Corporation Citigroup Inc. The Goldman Sachs Group, Inc. JPMorgan Chase & Co. Morgan Stanley State Street Corporation Wells Fargo & Company |
Comprehensive Capital Analysis and Review 2015 Summary Instructions and Guidance (PDF) | HTML
Federal Register notice: PDF | HTML
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