FED published results of the Comprehensive Capital Analysis and Review, or CCAR, for 2019. This year's CCAR reveals that the largest banks have strong capital levels and virtually all are meeting the supervisory expectations for capital planning. Consequently, FED is not objecting to the capital plans of all 18 firms, though it is requiring Credit Suisse to address certain limited weaknesses in its capital planning processes by October 27, 2019.
The firms in the test have significantly increased their capital since the first round of stress tests in 2009. In particular, the largest and most complex banks have more than doubled their common equity capital from about USD 300 billion to roughly USD 800 billion during that time. "The results show that these firms and our financial system are resilient in normal times and under stress," said Vice Chair for Supervision Randal K. Quarles. However, FED observes that, on balance, most of the firms participating in the CCAR 2019 qualitative assessment have continued to strengthen their capital planning practices since last year, with many of those firms meeting supervisory expectations for capital planning. Certain firms that are newer to CCAR have additional work to undertake to have sound, established capital planning practices and a limited number of firms that have been subject to the qualitative assessment for a number of years have certain weaknesses that limit their capital planning capabilities.
The Comprehensive Capital Analysis and Review, or CCAR, evaluated the capital planning processes and capital adequacy of 18 of the largest banking firms, including the firms' planned capital actions, such as dividend payments and share buybacks. FED considers both quantitative and qualitative factors when evaluating a bank's capital plan. Quantitative factors include a bank's projected capital ratio under a hypothetical severe recession. Qualitative factors include the firm's capital planning process, including its risk management, internal controls, and governance practices. FED can object to the capital plans of all banks in CCAR each year on quantitative grounds and firms that have been in CCAR for less than four years are also subject to an objection on qualitative grounds. If FED objects to a firm's capital plan, the bank cannot make any capital action unless authorized by FED. The CCAR quantitative assessment uses the same results as Dodd-Frank Act Stress Test (DFAST) and incorporates firms’ planned capital actions, such as dividend payments and common stock repurchases.
Keywords: Americas, US, Banking, Stress Testing, CCAR, DFAST, Credit Suisse, Capital Planning, Dodd-Frank Act, Basel III, FED
HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
PRA provided further information on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges arising from COVID-19 outbreak.
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
US Agencies (FDIC, FED, and OCC) published a final rule that makes technical changes to the March 31, 2020 interim final rule that provides a five-year transition period for the impact of the current expected credit loss (CECL) methodology on regulatory capital.
ECB published results of the March 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.