Instructions for Submission of Capital Plans

Mandatory Elements of a Capital Plan

As noted earlier, a BHC must submit its capital plan and supporting documentation to the Federal Reserve by January 5, 2015. The capital plan rule specifies the four mandatory elements of a capital plan: ⁷

1. An assessment of the expected uses and sources of capital over the planning horizon that reflects the BHC's size, complexity, risk profile, and scope of operations, assuming both expected and stressful conditions, including

   1. Estimates of projected revenues, losses, reserves, and pro forma capital levels--including any regulatory capital ratios (e.g., tier 1 leverage, common equity tier 1 capital, tier 1 risk-based capital, and total risk-based capital ratios) and any additional capital measures deemed relevant by the BHC--over the planning horizon under baseline conditions and under a range of stressed scenarios; these must include any scenarios provided by the Federal Reserve and at least one stress scenario developed by the BHC appropriate to its business model and portfolios.
   2. The calculation of pro forma tier 1 common ratio over the planning horizon under baseline conditions and under a range of stressed scenarios, inclusive of a discussion of how the company will maintain all minimum regulatory capital ratios and a pro forma tier 1 common ratio above 5 percent under expected conditions and the stressed scenarios required.
   3. A discussion of the results of the stress tests required by law or regulation, and an explanation of how the capital plan takes these results into account.
   4. A description of all planned capital actions over the planning horizon.
2. A detailed description of the BHC's process for assessing capital adequacy.
3. A BHC's capital policy.
4. A discussion of any baseline changes to the BHC's business plan that are likely to have a material impact on the BHC's capital adequacy or liquidity.

In addition to these mandatory elements, the Federal Reserve also requires a BHC to submit supporting information necessary to facilitate review of the BHC's capital plans under the Board's capital plan rule and in accordance with the FR Y-14 instructions.⁸ The capital plan elements described in the CCAR 2015 instructions do not replace the elements BHCs are required to provide in connection with the FR Y-14, including appendix A to the FR Y-14A describing supporting documentation. The mandatory elements, particularly the first element, overlap with some of the supporting documentation requirements. Some information submitted by BHCs may satisfy both the capital plan rule and the FR Y-14 requirements.

Back to section top

Organizing Capital Plan Submissions

The capital plan and any supporting information, including certain FR Y-14 schedules, must be submitted to the Federal Reserve through a secure collaboration site. In response to previous requests from BHCs for guidance on how to organize a capital plan when submitting it via the collaboration site, the Federal Reserve is providing in this year's instructions a suggested outline for submissions. The sections below provide greater detail regarding the suggested outline for both the capital plan narrative and supporting documentation, as well as define the submission components and map them to the mandatory elements in the capital plan rule and the FR Y-14A instructions.

When submitting materials to the secure collaboration site, BHCs will be able to categorize each component in order to ensure that supervisors can easily identify and review relevant documentation.Table 2 shows the categorization system that may be used for submissions to the secure collaboration site.

Table 2. Capital plan submission categorization scheme

Submission type (REQUIRED)	Submission subtype (REQUIRED)	Supporting materials only
		Comment (OPTIONAL) 1	Topic (REQUIRED)
Capital plan narrative	Complete narrative Capital plan Capital policy Planned capital actions Capital adequacy process Risk-identification program overview BHC scenario design process overview Material business plan changes Assumptions - limitations - weaknesses Governance framework Summary of audit findings Other (please define) 2
Supporting documents (capital plan & FR Y-14)	Policies and procedures Methodology inventory mapped to Y-14A Methodology and process overview Model technical document Model validation Audit report Results finalize & challenge materials Cons pro forma financials methodology Contact list Other (please define)2		General Wholesale Retail Operational risk Securities Trading Counterparty PPNR - balance sheet - RWA Regulatory capital
FR Y-14 schedule (OFFICIAL TEMPLATES) 3	Y-14A - Sch A - Summary Y-14A - Sch B - Scenario Y-14A - Sch C - Reg cap instruments Y-14A - Sch D - Reg cap transitions Y-14A - Sch E - Ops risk Y-14A - Sch F - Counterparty credit Y-14Q - Sch A - Retail Y-14Q - Sch B - Securities Y-14Q - Sch C - Reg cap instruments Y-14Q - Sch D - Reg cap transitions Y-14Q - Sch E - Ops risk Y-14Q - Sch F - Trading Y-14Q - Sch G - PPNR Y-14Q - Sch H - Wholesale Y-14Q - Sch I - MSR valuation Y-14Q - Sch J - FVO/HFS Y-14Q - Sch K - Supplemental

1. See FR Y-14A Instructions, Appendix A: Supporting Documentation. Return to table

2. If BHC selects "Other," it will be prompted to provide a description of the submission. Return to table

3. There will be additional submission categories for any special collections in CCAR 2015. Return to table

Capital Plan Narrative

This section outlines a potential organizational structure for a BHC's capital plan narrative.

• Capital plan: Provides a summary of the BHC's capital plan and the pro forma financial results under the different scenarios evaluated as part of the capital adequacy process. The document should summarize the BHC's proposed capital actions, the various scenarios, the key risks and drivers of financial performance under each scenario, key assumptions, any process weaknesses or other uncertainties that could affect results, and any mitigating controls. The document should also summarize how certain risks that are not captured in the stress scenario analysis are addressed in the capital adequacy process.
• Capital policy: Provides the BHC's standalone, written policy outlining the principles and guidelines used for capital planning, capital issuance, usage, and distributions (mandatory element 3).
• Planned capital actions: Provides (1) a description of all planned capital actions over the planning horizon and (2) a summary of all capital actions by instrument in each quarter of the nine-quarter planning horizon, which should align with the capital actions included in the FR Y-14A Summary and Regulatory Capital Instruments schedules (mandatory element 1(d)). (See "Description of All Capital Actions Assumed over the Planning Horizon".)
• Capital adequacy process: Provides a detailed description of the BHC's process for assessing capital adequacy, including all assumptions, limitations, weaknesses, and uncertainties that could potentially have a material impact on consolidated results (mandatory element 2).
• Risk-identification program overview: Describes the risk-identification process the BHC uses to support the BHC-wide stress testing required in the capital plans and how and where these risks are captured in the BHC's capital adequacy process. (See "Supporting Documentation for Analyses Used in Capital Plans".)
• BHC scenario design process overview: Describes the BHC's process and approach to developing the BHC baseline and stress scenarios, including all methodologies, variables, and key assumptions and how the BHC stress scenarios address the BHC's particular vulnerabilities. (See "BHC Scenarios" and "Supporting Documentation for Analyses Used in Capital Plans".)
• Material business plan changes: Provides a discussion of any expected changes to the BHC's business plan that are likely to have a material impact on the BHC's capital adequacy and funding profile (e.g., a proposed merger or divestiture, changes in key business strategies, or significant investments) (mandatory element 4).
• Summary of assumptions, limitations, and weaknesses: Describes all assumptions, limitations, weaknesses, and uncertainties that could potentially have a material impact on consolidated results or material loss or revenue estimates.
• Governance framework: Describes internal governance around the development of the BHC's comprehensive capital plan. Documentation should demonstrate that senior management has provided the board of directors with sufficient information to facilitate the board's understanding of the stress testing used by the firm for capital planning purposes.
• Summary of audit findings: Provides a summary of the most recent findings and conclusions from a review of the BHC's capital adequacy process carried out by internal audit or an independent party. In the discussion, the BHC should describe the scope of the audit work and specifically identify any areas of the end-to-end capital adequacy process that have not been independently reviewed by a third party.

If the BHC chooses to organize its capital plan narrative in the format set forth above, the capital plan narrative elements may be submitted as one large file, as individual files, or as several files that combine various elements. When uploading these documents to the secure collaboration site, a BHC should follow these instructions:

1. For submission type, categorize all documents as "Capital plan narrative."
2. For submission subtype, please choose the appropriate category from the list below based on the descriptions above.

• Submission subtype categories: (1) Complete narrative, (2) Capital plan, (3) Capital policy, (4) Planned capital actions, (5) Capital adequacy process, (6) Risk-identification program overview, (7) BHC scenario design process overview, (8) Material business plan changes, (9) Assumptions - limitations - weaknesses, (10) Governance framework, (11) Summary of audit findings, and (12) Other
• If the entire capital plan narrative (i.e., all elements above) is in one file, please choose "Complete narrative."
• If combining some of the elements above into one file, please choose "Other" and provide a description of the document in the "Other - define" field.
• If documentation does not fit one of the defined elements above, please choose "Other" and provide a description of the document in the "Other - define" field.

Capital Plan and FR Y-14A Supporting Documentation

This section outlines a potential organizational structure for the required documentation that each BHC must submit through the collaboration site to support the capital plan and the FR Y-14A schedules. The model and methodology documentation described below should be organized by the following topics: retail, wholesale, fair value option and held-for-sale loans, securities, trading, counterparty, operational risk, pre-provision net revenue (PPNR), mortgage-servicing rights (MSR), and regulatory capital transitions. This supporting documentation also addresses mandatory element 1 under the capital plan rule.

• Policies and procedures: All policies and procedures related to the capital adequacy process, including the BHC's model risk-management policy. (See the FR Y-14A instructions for specific supervisory expectations for a model risk management policy.)
• Methodology and model inventory mapping to
  FR Y-14A: Provides an inventory of all models and methodologies used to estimate losses, revenues, expenses, balances, and risk-weighted assets (RWAs) and the status of validation/independent review for each. As required by the FR Y-14A instructions, documentation should also include mapping that clearly conveys the methodology used for each FR Y-14A product line under each stress scenario. (See "Supporting Documentation for Analyses Used in Capital Plans".)

• Methodology documentation: Methodology documentation should include, at a minimum, the following documents:

  • Methodology and process overview: Describes key methodologies and assumptions for performing stress testing on the BHC's portfolios, business, and exposures. Documentation should clearly describe the model-development process, the derivation of outcomes, validation procedures, and key assumptions. Supporting documentation should clearly describe any known model weaknesses and how such information is factored into the capital plan.
  • Model technical documents: Includes thorough documentation of key methodologies and assumptions for performing stress testing. The documentation should include the design, theory, and logic underlying the methodology and any available empirical support. (See appendix A of the FR Y-14A instructions.)
  • Model validation: Includes model validation documentation on the following elements: conceptual soundness, model robustness and limitations, use of qualitative adjustments or other expert judgment, exception reports, and outcomes analysis. (See appendix A of the FR Y-14A instructions.)

In past CCAR exercises, many BHCs have provided audit reports and documentation on results finalization and the challenge process as part of their capital plan submissions. BHCs submitting documentation similar to that described below should use the following categories.

• Audit reports: Includes audit reports from a BHC's audit of the capital adequacy process, including reviews of the models and methodologies used in the process. (See Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Current Range of Practice.)
• Results finalization and challenge materials: Provides any documentation relating to the review, challenge, and aggregation processes and the finalization of results used in a BHC's capital planning processes to ensure transparency and repeatability.

Methodology documentation should be provided in accordance with the supporting documentation requirements outlined in the appendix of the FR Y-14A instructions as follows:

• Retail- See A.2 in the appendix.
• Wholesale- See A.3 in the appendix.
• Fair value option and held-for-sale loans- See A.4 in the appendix.
• AFS/HTM Securities- See A.5 in the appendix.
• Trading- See A.6 in the appendix.
• Counterparty credit risk- See A.7 in the appendix.
• Operational risk- See A.8 in the appendix.
• PPNR- See A.9 in the appendix.
• MSR- See A.10 in the appendix.
• Regulatory capital transitions- See Schedule D in the appendix.

• Consolidated pro forma financials methodology - Describes (1) how the various balance sheet and income statement line items were developed and reported; (2) the specific assumptions used to calculate regulatory capital, including a discussion of any proposed capital distributions; and (3) any other information necessary to understand the BHC's capital calculations (e.g., calculations related to the projections of the deferred tax asset or servicing assets that may be disallowed for regulatory capital purposes). Methodology documentation should be provided in accordance with the supporting documentation requirements outlined in A.1 of the appendix of the FR Y-14A instructions for the Income Statement, Balance Sheet, and Capital worksheets.

If a BHC chooses to organize its capital plan and FR Y-14A supporting documentation in the format set forth above, the BHC should follow these instructions:

1. For submission type, categorize all supporting documents as "Supporting document."

   • Do not categorize any FR Y-14 supporting documentation as "FR Y-14 Schedule." That category is for FR Y-14 schedules only--that is, Excel or XML files only.

2. For submission subtype, please choose the appropriate category from the list below based on the descriptions above.

   • Submission subtype categories: (1) Policies and procedures, (2) Methodology inventory mapped to FR Y-14A, (3) Methodology and process overview, (4) Model technical documents, (5) Model validation, (6) Audit report, (7) Results finalization & challenge, (8) Cons pro forma financials methodology, and (9) Other
   • If you have combined some of the elements above into one file, please choose "Other" and provide a description of the supporting document in the "Other - define" field.
   • If you have supporting documentation that does not fit one of the defined elements above, please choose "Other" and provide a description of the supporting document in the "Other - define" field.
3. In the "Comment" field, please provide the information described in the appendix of the FR Y-14A instructions for each supporting document.

4. For the topic, please choose the appropriate category from the list below.

   • Topic categories: (1) General, (2) Wholesale, (3) Retail, (4) Operational risk, (5) Securities, (6) Trading, (7) Counterparty, (8) PPNR - balance sheet - RWA, and (9) Regulatory capital
   • All supporting documentation should be categorized by one of the specific topic categories above. The "General" category should only be used for (1) policies and procedures that are not related to a specific topic, (2) the methodology inventory, (3) consolidated pro forma financials methodology, and (4) any documentation on results finalization and the challenge process that are not topic specific.

Back to section top

Data Supporting a Capital Plan Submission

In conducting its assessment of a BHC's capital plan, the Federal Reserve relies on the completeness and accuracy of information provided by the BHC. As such, the BHC's internal controls around data integrity are critical to the Federal Reserve's ability to conduct CCAR. The Federal Reserve notes that CCAR BHCs are currently subject to requirements relating to the accuracy of the "Capital Assessments and Stress Testing" (FR Y-14A) and "Consolidated Financial Statements for Holding Companies" (FR Y-9C) reporting forms.⁹ Further, in Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Current Range of Practice, the Federal Reserve clarifies that a BHC should have a strong internal control framework that helps govern its internal capital planning processes, including stress testing performed under the CCAR program, and that framework should include comprehensive documentation of the BHC's policies and procedures.¹⁰

A BHC is expected to have documentation outlining its procedures for meeting the accuracy requirements of these reporting forms and its evaluation of the results of such procedures. As a best practice, these procedures would take into consideration the points in the data compilation and regulatory reporting systems and processes where a material misstatement could occur, as well as controls in place to mitigate those risks. In addition, a BHC should have information about any identified weaknesses in its controls around regulatory reporting and any plans to enhance the control structure around regulatory reporting.

FR Y-14 Data Submission

In general, all BHCs are required to report all data elements asked for in the FR Y-14 schedules; however, certain schedules, worksheets, or data elements may be optional for a BHC. The instructions for the FR Y-14A, FR Y-14Q, and FR Y-14M schedules provide details on how to determine whether a BHC must submit a specific schedule, worksheet, or data element.

BHCs may be asked to resubmit FR Y-14 data--either in whole or in part--after the initial due date as specified in the associated report instructions should errors or omissions be found.¹¹ All resubmissions of FR Y-14Q and FR Y-14M data as of September 30 will be due on or before December 31, 2014. All resubmissions of FR Y-14A schedules will be due on or before January 23, 2015. (See "Quantitative Assessments" for the treatment of unresolved data issues.)

Under the capital plan rule, failure to submit complete data to the Federal Reserve in a timely manner may be a basis for objection to a capital plan.¹² A BHC's inability to provide required data by the due dates may affect supervisory estimates of losses and PPNR for the BHC, and bears on the Federal Reserve's qualitative assessment of the internal risk-measurement and risk-management practices supporting a BHC's capital adequacy process.

Back to section top

References

• Other Formats

• Full report (PDF)

• Stay Connected

• Twitter
• YouTube
• Flickr
• RSS Feeds
• Subscribe