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Comprehensive Capital Analysis and Review 2016: Assessment Framework and Results

Requirements in CCAR 2016

In November 2011, the Federal Reserve began requiring BHCs with consolidated assets of $50 billion or more to submit annual capital plans to the Federal Reserve for review.5 For the CCAR 2016 exercise, the Federal Reserve issued instructions on January 28, 2016, 6 and received capital plans from participating BHCs on April 5, 2016.7

The capital plan rule specifies four mandatory elements of a capital plan: 8

  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 minimum regulatory capital ratios (e.g., tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based, 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 that is appropriate to its business model and activities;
    2. 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; and
    3. a description of all planned capital actions over the planning horizon;

  2. a detailed description of the BHC's processes for assessing capital adequacy, including

    1. a discussion of how the bank holding company will, under expected and stressful conditions, maintain capital commensurate with its risks, maintain capital above the minimum regulatory capital ratios, and serve as a source of strength to its subsidiary depository institutions;
    2. a discussion of how the bank holding company will, under expected and stressful conditions, maintain sufficient capital to continue its operations by maintaining ready access to funding, meeting its obligations to creditors and other counterparties, and continuing to serve as a credit intermediary;
  3. the BHC's capital policy; and
  4. 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 or liquidity.

The Board revised its regulatory capital framework in 2013 to address shortcomings in capital requirements that became apparent during the financial crisis.9 These revisions introduced a common equity tier 1 ratio and increased the quantity and quality of capital that banking organizations are required to hold. The revisions are being phased in from 2014 until 2018 and, generally, each BHC must meet the regulatory capital requirements for each projected quarter of the planning horizon in accordance with the capital requirements that will be in effect during that quarter.10 The majority of the revised regulatory capital framework becomes fully phased-in in the last quarter of the CCAR 2016 projection horizon (the first quarter of 2018).


References

5. See 12 CFR 225.8. Asset size is measured over the previous four calendar quarters as reported on the FR Y-9C regulatory report. If a BHC has not filed the FR Y-9C for each of the four most recent consecutive quarters, average total consolidated assets means the average of the company's total consolidated assets, as reported on the company's FR Y-9C, for the most recent quarter or consecutive quarters. Return to text

6. See Board of Governors of the Federal Reserve System, "Comprehensive Capital Analysis and Review 2016 Summary Instructions" (Washington: Board of Governors, January 2016), www.federalreserve.gov/newsevents/press/bcreg/bcreg20160128a1.pdf. Return to text

7. The BHCs participating in CCAR 2016 are Ally Financial Inc.; American Express Company; BancWest Corporation; 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.; Citizens Financial Group, Inc.; Comerica Incorporated; Deutsche Bank Trust Corporation; Discover Financial Services; Fifth Third Bancorp; The Goldman Sachs Group, Inc.; HSBC North America Holdings Inc.; Huntington Bancshares Incorporated; JPMorgan Chase & Co.; KeyCorp; M&T Bank Corporation; Morgan Stanley; MUFG Americas Holdings Corporation; Northern Trust Corporation; The PNC Financial Services Group, Inc.; Regions Financial Corporation; Santander Holdings USA, Inc.; State Street Corporation; SunTrust Banks, Inc.; TD Group US Holdings LLC; U.S. Bancorp; Wells Fargo & Company; and Zions Bancorporation. The legal name of BancWest Corporation was First Hawaiian, Inc., at the time that CCAR was published. However, the entity is referred to as BancWest Corporation throughout the document, as it will revert to being called BancWest Corporation on
July 1, 2016. Return to text

8. See 12 CFR 225.8(e)(2). Return to text

9. See 78 FR 62018 (October 11, 2013); 12 CFR part 217. Return to text

10. BHCs did not use the advanced approaches to calculate risk-weighted assets in CCAR 2016. See 12 CFR 225.8(d)(8). BHCs were not required to meet the minimum supplementary leverage ratio requirement of 3 percent as part of the quantitative assessment in CCAR 2016. See 12 CFR 225.8(c)(3). Return to text

Last update: July 26, 2016

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