June 27, 2019

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.

 

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Keywords: Americas, US, Banking, Stress Testing, CCAR, DFAST, Credit Suisse, Capital Planning, Dodd-Frank Act, Basel III, FED

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