March 06, 2019

FED amended the capital plan rule to limit use of "qualitative objection" in the Comprehensive Capital Analysis and Review (CCAR) exercise, effective for the 2019 cycle. The changes to the capital plan rule become effective immediately. FED also released instructions for the CCAR exercise for the 2019 cycle. FED published the list of 18 firms that will be subject to the CCAR exercise this year, with five of those firms being subject to a possible qualitative objection.

The amendment to the capital plan rule limits the scope of potential objections to a firm’s capital plan on the basis of qualitative deficiencies in the firm’s capital planning process (qualitative objection). FED will no longer issue a qualitative objection under the capital plan rule to a firm if the firm has been subject to a potential qualitative objection for four consecutive years and the firm does not receive a qualitative objection in the fourth year of that period. In addition, except for certain firms that have received a qualitative objection in the (immediate) prior year, FED will no longer issue a qualitative objection to any firm effective January 01, 2021. While the qualitative objection will no longer apply to certain firms, all firms will continue to be subject to a rigorous evaluation of their capital planning processes as part of CCAR. Firms with weak practices may be subject to a deficient supervisory rating, and potentially an enforcement action, for failing to meet supervisory expectations. In addition, all firms remain subject to a potential objection on quantitative grounds.

 

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Effective Date: March 06, 2019

Keywords: Americas, US, Banking, Stress Testing, CCAR, Capital Plan Rule, Instructions, FED

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