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June 28, 2017

FED released results of the Comprehensive Capital Analysis and Review (CCAR). It completed review of the capital planning practices of the nation's largest banks and did not object to the capital plans of all 34 bank holding companies participating in CCAR. However, FED is requiring Capital One Financial Corporation to address the identified weaknesses in its capital planning process and resubmit its capital plan by the end of 2017.

This year, 13 of the largest and most complex banks were subject to both the quantitative and qualitative assessments while 21 other firms in CCAR were subject only to the quantitative assessment. U.S. firms have substantially increased their capital since the first round of stress tests led by the FED in 2009. The common equity capital ratio—which compares high-quality capital to risk-weighted assets—of the 34 bank holding companies in the 2017 CCAR has more than doubled from 5.5% in the first quarter of 2009 to 12.5% in the first quarter of 2017. This reflects an increase of more than USD 750 billion in common equity capital to a total of USD 1.25 trillion during the same period.

CCAR, in its seventh year, evaluates the capital planning processes and capital adequacy of the largest U.S.-based bank holding companies, including the firms' planned capital actions such as dividend payments and share buybacks. When considering a firm's capital plan, the FED considers both quantitative and qualitative factors. Quantitative factors include a firm's projected capital ratios under a hypothetical scenario of severe economic and financial market stress. Qualitative factors include the strength of the firm's capital planning process, which incorporate risk management, internal controls, and governance practices that support the process. The FED may object to a capital plan based on quantitative or qualitative concerns and, if it does, a firm may not make any capital distribution unless authorized by the FED.

Related Links: CCAR Results (PDF)

Keywords: Americas, FED, Banking, CCAR, Stress Testing, DFast

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