Board of Governors of the Federal Reserve System

The Federal Reserve Board on Friday issued the supervisory scenarios that will be used in the 2014 capital planning and stress testing program, as well as instructions to firms with timelines for submissions.  The program includes the Comprehensive Capital Analysis and Review (CCAR) of 30 bank holding companies with $50 billion or more of total consolidated assets. 

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 has been an integral component of the Federal Reserve's broader supervisory and regulatory efforts to make the financial system stronger and safer since the financial crisis," Gov. Daniel K. Tarullo said. 

Financial institutions submitting capital plans will be evaluated to ensure they have sufficient capital to continue to lend to households and businesses even under stressful conditions.  In addition, they must incorporate the transition requirements from the recently finalized Basel III capital standards into their stress tests and capital plans.

CCAR includes an evaluation of institutions' plans to make capital distributions, such as dividend payments or stock repurchases.  The Federal Reserve will approve capital distributions only for institutions whose capital plans it approves and who demonstrate sufficient financial strength even after making the planned capital distributions to continue operating as financial intermediaries under stressful economic and financial conditions.

Eighteen bank holding companies will be participating in the CCAR for the fourth consecutive year in 2014.  An additional 12 financial institutions will be participating in CCAR for the first time during this stress testing cycle. 

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 18 bank holding companies have increased their aggregate tier 1 common capital to $836 billion in the second quarter of 2013, the period of most recent data, from $392 billion in the first quarter of 2009.  The tier 1 common ratio for these firms, which compares high-quality capital to risk-weighted assets, has more than doubled to a weighted average of 11.1 percent from 5.3 percent.

All 30 of the companies in the CCAR in 2014 must submit their capital plans on or before January 6, 2014.

As in previous years, the Federal Reserve in March will release summary results, including supervisory projections of capital ratios, losses, and revenues under stress scenarios. For the first time in 2014, the Federal Reserve will publish the results of stress tests conducted under the supervisory adverse scenario.  As in prior years, results of stress tests under the severely adverse scenario will also be released.

The Federal Reserve will require institutions to use the supervisory scenarios in both the stress tests conducted as part of the CCAR and in the stress tests that are part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Some companies that are not part of CCAR, including state member bank subsidiaries of CCAR participants and some companies with between $10 billion and $50 billion in assets, also will use the supervisory scenarios for Dodd-Frank Act stress tests.

The baseline, adverse, and severely adverse scenarios include 28 variables, including economic activity, unemployment, exchange rates, prices, incomes, and interest rates.  To accompany the scenarios, the Federal Reserve is publishing a narrative that describes the general conditions surrounding the scenarios, changes to the scenarios from previous years, and a general description of other variables that firms may use in their stress tests. 

As in prior years, six bank holding companies with large trading operations will be required to factor in a global market shock as part of their scenarios.  The Federal Reserve will publish the components of the global market shock soon.  In addition, for the first time in 2014, eight bank holding companies with substantial trading or custodial operations will be required to incorporate a counterparty default scenario.
 

Previous CCAR participants, also participants in 2014	Participants new to CCAR in 2014	Global market shock participants, 2014	Counterparty default participants, 2014
Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation BB&T Corporation Capital One Financial Corporation Citigroup Inc. Fifth Third Bancorp The Goldman Sachs Group, Inc. JPMorgan Chase & Co. KeyCorp Morgan Stanley The PNC Financial Services Group, Inc. Regions Financial Corporation State Street Corporation SunTrust Banks, Inc. U.S. Bancorp Wells Fargo & Company	BMO Financial Corp. BBVA Compass Bancshares, Inc. Comerica Inc. Discover Financial Services HSBC North America Holdings Inc. Huntington Bancshares Inc. M&T Bank Corp. Northern Trust Corp. RBS Citizens Financial Group, Inc. Santander Holdings USA, Inc. UnionBanCal Corp. Zions Bancorp	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

2014 Supervisory Scenarios for Annual Stress Tests Required under the Dodd-Frank Act Stress Testing Rules and the Capital Plan Rule (PDF) | HTML

Comprehensive Capital Analysis and Review 2014: Summary Instructions and Guidance (PDF) | HTML 

Related Information

For media inquiries, call 202-452-2955.