Accessible Version
Cyclicality and the Severity of the U.S. Supervisory Stress Test: 2014 to 2018 Accessible Data
Figure 1: Paths of Unemployment Rate and House Prices, Actual and Supervisory Severely Adverse Scenario, CCAR 2014 to CCAR 2018
Description: Title is “Figure 1: Paths of Unemployment Rate and House Prices, Actual and Supervisory Severely Adverse Scenario, CCAR 2014 to CCAR 2018” and the structure is a line graph on two panels. The sources are the Bureau of Labor Statistics, CoreLogic, and the Federal Reserve supervisory scenario projections.
The left panel shows the unemployment rate and the y-axis ranges from an unemployment rate of three percent to an unemployment rate of 13 percent. The x-axis is from 2007 to 2021. The panel contains a black line showing the historical unemployment rate, which starts between 4 and 5 percent in 2007, rapidly rises to a peak of just over 10 percent in 2009, and then declined at a steady rate through the end of 2017. It also contains lines representing the projections under the supervisory severely adverse scenarios from the 2014 through 2018 stress tests. All of the projection lines have a similar contour, rising sharply to a peak before beginning a modest decline. The 2014 line starts at 7.2 percent and peaks at 11.3 percent. The 2015 line starts at 6.1 percent and peaks at 10.1 percent. The 2016 line starts at 5 percent and peaks at 10 percent. The 2017 line starts at 4.7 percent and peaks at 10 percent. The 2018 line starts at 4.1 percent and peaks at 10 percent. The plot also contains a baseline projection for the 2018 cycle, and that line is relatively flat over the projection horizon finishing just below the level of the unemployment rate at the end of 2017.
The right panel shows a house price index and the y-axis ranges from 100 to 205. The x-axis is from 2007 to 2021. The panel contains a black line showing the historical house price index, which starts around 190, falls sharply to between 130 and 145 before beginning a steady rise starting around 2012. The historical house price rises from about 140 to just over 190 between 2012 and the end of 2017. It also contains lines representing the projections under the supervisory severely adverse scenarios from the 2014 through 2018 stress tests. All of the projection lines have a similar contour, declining sharply to a trough before beginning a modest increase. The 2014 line starts at around 159 and reaches a trough at around 118. The 2015 line starts at around 172 and reaches a trough at around 128. The 2016 line starts at around 183 and reaches a trough at around 137. The 2017 line starts at around 183 and reaches a trough at around 137. The 2018 line starts at around 194 and reaches a trough at around 136. The plot also contains a baseline projection for the 2018 cycle, and that line increases steadily to a value just above 205 by 2021. The starting points for the projection lines and the historical path don’t perfectly align because historical values reflect data revisions released after the publication of the respective scenario.
Source: Bureau of Labor Statistics, CoreLogic, and Federal Reserve supervisory scenario projections. Historical paths are based on the latest data release. The differences between past scenario jump-off points and historical values reflect data revisions released after the publication of the respective scenario.
Figure 2: Delinquency Rate on Loans
Description: Title is “Figure 2: Delinquency Rate on Loans” and the structure is a time series line plot. The source is the FR Y-9C report. The y-axis is the delinquency rate in percent with a range from 0 to 11 percent. The x-axis shows years from 1998 to 2018. There are two lines: a red line and a blue line. The red line includes the full set of banks continuously subject to the supervisory stress test since 2014. The blue line includes the subset of those banks for which FR Y-9C data are available from 1998q4 to present. The blue line starts at the end of 1998 at just over 2 percent, rises to just above 3 percent in 2002 before falling to around 2 percent in 2006 and 2007. Then the delinquency rate rises sharply to a peak of around 9 percent in 2010, before declining at a relatively steady pace to just under 2 percent in 2018. The red line follows a similar contour and level as the blue line, but is only plotted from 2009 through 2018.
Source: FR Y-9C. The red dashed line includes the full set of banks continuously subject to the supervisory stress test since 2014. The blue line includes the subset of those banks for which FR Y-9C data are available from 1998q4 to present. Delinquency rate is defined as balance of loans 30 days past due or in nonaccrual divided by total loan balances.
Figure 3: Trailing four-quarter PPNR to Average Assets
Description: Title is “Figure 3: Trailing four-quarter PPNR to Average Assets.” and the structure is a time series line plot. The source is the FR Y-9C report. The y-axis is the trailing four-quarter PPNR to average assets in percent with a range from 0.5 to 3 percent. The x-axis shows years from 1998 to 2018. There are two lines: a red line and a blue line. The red line includes the full set of banks continuously subject to the supervisory stress test since 2014. The blue line includes the subset of those banks for which FR Y-9C data are available from 1998q4 to present. The line declines modestly from 2000 to 2007, with fairly significant volatility, from just over 2.5 to about 2.25. Then it declines sharply to below 1 percent in 2009, rebounding to about 2 percent in 2010, and then declining to just below 1.5 in 2012. The volatility in the series moderated between 2012 and 2018, and the ratio rose at a modest pace from about 1.25 in 2012 to about 1.75 in 2018. The red line follows a similar contour and level as the blue line, but is only plotted from 2009 through 2018.
Source: FR Y-9C. The red dashed line includes the full set of banks continuously subject to the supervisory stress test since 2014. The blue line includes the subset of those banks for which FR Y-9C data are available from 1998q4 to present. PPNR is defined as net interest income plus noninterest income minus noninterest expense.
Figure 4: Decomposition of Decline in Common Equity Ratio
Description: Title is “Figure 4: Decomposition of Decline in Common Equity Ratio.” and the structure is a stacked bar chart. Source is from Federal Reserve staff estimates derived from CCAR results. The y-axis shows the decline in projected common equity over the stress test horizon as a percent of the projected RWA, and the axis ranges from 0 percent to 7 percent. There are five bars, each representing the results from the stress test exercises from each of the following years: 2014, 2015, 2016, 2017, and 2018. The total height of the stacked bars represents the decline in the common equity ratio, and that is decomposed into two components: (1) dark blue bars that represent the stress test effect on common equity ratios excluding distributions and (2) light blue bars that represent the effect of distributions on the decline in the common equity ratio. The chart also contains a dashed line that represents the average non-distribution stress test effect observed over the years, and that line is at about 3 percent. The heights of the total bars in each year are approximately: 4.9 percent in 2014, 4.8 percent in 2015, 5.2 percent in 2016, 5.3 percent in 2017, and 6.1 percent in 2018. The heights of the dark blue section of the bars in each year are approximately: 3.2 percent in 2014, 3.1 percent in 2015, 3.4 percent in 2016, 2.5 percent in 2017, and 2.7 percent in 2018. The light blue bars are the difference between the height of the total bar and the height of the dark blue bar.
Note: Sample includes a balanced panel of the 28 firms that have participated in the stress tests since 2014. Values are taken under the Supervisory Severely Adverse scenario. The dashed line represents the average non-distribution stress test effect observed in CCAR 2014 through 2018. Capital is measured using tier 1 common in 2014 and 2015, and CET1 thereafter. RWA is measured using the generalized approach for 2015 and 2015, and the standardized approach thereafter. Key identifies bar segments in order from bottom to top.
Source: Staff estimates derived from CCAR results.
Figure 5: Decomposition of Stress Test Severity
Description: Title is “Figure 5: Decomposition of Stress Test Severity” and the structure is a stacked bar chart. Source is from Federal Reserve staff estimates derived from CCAR results. The y-axis shows the decline in projected common equity over the stress test horizon as a percent of the projected RWA, and the axis ranges from just below 0 percent to nearly 4 percent. There are five bars, each representing the results from the stress test exercises from each of the following years: 2014, 2015, 2016, 2017, and 2018. The stacked bars are associated with the contributions to the decline of the following four components: (1) balance sheet growth represented by red bars, (2) regulatory capital deductions and taxes represented by grey bars, (3) change in accumulated other comprehensive income (AOCI) represented by yellow bars, and (4) pretax net income represented by green bars. The heights of the balance sheet bars in each year are approximately: 0.4 percent in 2014, 0.5 percent in 2015, 1 percent in 2016, 0.9 percent in 2017, and 0.6 percent in 2018. The heights of the regulatory capital deductions and taxes bars in each year are approximately: 0.4 percent in 2014, 0.1 percent in 2015, 0.6 percent in 2016, 0.5 percent in 2017, and 0.5 percent in 2018. The AOCI bars are not included in 2014 and 2015 because AOCI did not flow through the measure of common equity (tier 1 common) that was in effect in those years. The heights of the AOCI bars in each of the other years are approximately: -0.1 percent in 2016, 0.1 percent in 2017, and 0.3 percent in 2018. The heights of the pretax net income bars in each year are approximately: 2.5 percent in 2014, 2.4 percent in 2015, 1.8 percent in 2016, 1.0 percent in 2017, and 1.3 percent in 2018.
Note: Sample includes a balanced panel of the 28 firms that have participated in the stress tests since 2014. Values are taken under the Supervisory Severely Adverse scenario. The dashed line represents the average non-distribution stress test effect observed in CCAR 2014 through 2018. Capital is measured using tier 1 common in 2014 and 2015, and CET1 thereafter. RWA is measured using the generalized approach for 2014 and 2015, and the standardized approach thereafter. AOCI does not flow through tier 1 common.
Source: Staff estimates derived from CCAR results.
Figure 6: Components of Pre-tax Net Income, Supervisory Severely Adverse, CCAR 2014 to CCAR 2018
Description: Title is “Figure 6: Components of Pre-tax Net Income, Supervisory Severely Adverse, CCAR 2014 to CCAR 2018” and the structure is a bar chart on four panels. The source of the data is the publicly disclosed DFAST results.
The first panel (6a) shows total loan losses relative to risk-weighted assets at the 28 banks that participated in all CCAR exercises from 2014 to 2018, and the y-axis ranges from a ratio of 0 percent to 5 percent. There are five bars corresponding to the total loan losses projected in the 2014 through 2018 supervisory stress tests under the Supervisory Severely Adverse scenario. The bar heights are roughly 4.2 percent in 2014, 3.7 percent in 2015, 3.6 percent in 2016, 3.6 percent in 2017, and 4.1 percent in 2018.
The second panel (6b) shows total pre-provision net revenue (PPNR) to risk-weighted assets at the 28 banks that participated in all CCAR exercises from 2014 to 2018, and the y-axis ranges from a ratio of 0 percent to 5 percent. There are five bars corresponding to the PPNR projected in the 2014 through 2018 supervisory stress tests under the Supervisory Severely Adverse scenario. The bar heights are roughly 3.7 percent in 2014, 3.4 percent in 2015, 3.7 percent in 2016, 4.0 percent in 2017, and 4.7 percent in 2018.
The third panel (6c) shows trading and counterparty losses relative to risk-weighted assets at the 8 domestic firms subject to the trading or counterparty loss components of the supervisory stress test from 2014 to 2018, and the y-axis ranges from a ratio of 0 percent to 5 percent. There are five bars corresponding to the trading and counterparty losses projected in the 2014 through 2018 supervisory stress tests under the Supervisory Severely Adverse scenario. The bar heights are roughly 1.6 percent in 2014, 1.6 percent in 2015, 1.6 percent in 2016, 1.2 percent in 2017, and 1.5 percent in 2018.
The fourth panel (6d) shows other losses relative to risk-weighted assets at the 28 firms that participated in all CCAR exercises from 2014 to 2018, and the y-axis ranges from a ratio of 0 percent to 5 percent. There are five bars corresponding to the other losses projected in the 2014 through 2018 supervisory stress tests under the Supervisory Severely Adverse scenario. The bar heights are roughly 0.4 percent in 2014, 0.5 percent in 2015, 0.3 percent in 2016, 0.2 percent in 2017, and 0.4 percent in 2018.
Note (Figures 6a, 6b, and 6d): Sample includes the 28 banks that have participated in all CCAR exercises since 2014. The values are taken under the Supervisory Severely Adverse scenario.
Note (Figure 6c): Sample includes the 8 domestic LISCC firms. The values are taken under the Supervisory Severely Adverse scenario.
Source: Publicly disclosed DFAST results.