Comprehensive Capital Analysis and Review 2013: Assessment Framework
On November 9, 2012, the Federal Reserve issued instructions for the CCAR 2013 exercise, 9 and on January 7, 2013, the Federal Reserve received capital plans from 18 BHCs.10 In addition, 11 BHCs with total assets of greater than $50 billion that are not included in CCAR, but that are required to submit annual capital plans under the capital plan rule participated in the 2013 Capital Plan Review (CapPR). (See box 3 for details on the CapPR.)
BHCs that participated in CCAR were required to include in their capital analysis and capital plans the results of the company-run stress tests based on three supervisory scenarios as required by the Dodd-Frank Act and the Board's implementing rules: the supervisory baseline, supervisory adverse, and supervisory severely adverse scenarios.11 BHCs were also required to use at least one stress scenario developed by the BHC (BHC stress) and a BHC baseline scenario.
The CCAR review was conducted by a range of Federal Reserve staff, including senior bank supervisors, financial analysts, accounting and legal experts, economists, risk-management specialists, financial-risk modelers, regulatory capital analysts, and the onsite examiners responsible for each of the 18 BHCs. This multidisciplinary approach applied during each CCAR continues to bring diverse perspectives to the Federal Reserve's assessment of these plans. As in previous years, the Federal Reserve in 2013 also worked and consulted with the primary federal bank regulators of the BHCs' subsidiary insured depository institutions--the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
The annual CCAR program continues to enhance supervisors' understanding of the underlying processes used by each BHC to assess the adequacy of the size and composition of capital relative to the risks faced by the BHC. The results of these comprehensive capital plan reviews also serve as inputs into other aspects of the Federal Reserve's development of its supervisory strategy for these BHCs.
Box 3. 2013 Capital Plan Review for Non-CCAR BHCs with Assets Greater than $50 Billion
The 2013 Capital Plan Review (CapPR) is an assessment of the capital plans and proposed capital actions of 11 BHCs with total assets of $50 billion or greater that were not included in CCAR, but that are required to submit annual capital plans under the capital plan rule.1 Specifically, BHCs participating in CapPR 2013 are subject to the capital plan rule, but are not required to comply with the Board's rules implementing sections 165(i)(1) and (2) of the Dodd-Frank Act until the stress test cycle commencing on October 1, 2013.2 These BHCs were not subject to a supervisory stress test carried out by the Federal Reserve. Accordingly, there are no supervisory stress test results for the Federal Reserve to disclose with respect to these BHCs.
Under the capital plan rule, each BHC participating in CapPR was required to submit a capital plan, with internal stress tests and forward-looking capital projections under four scenarios.3 These BHCs used two of the same supervisory scenarios (supervisory baseline and supervisory severely adverse) as BHCs participating in CCAR, along with a BHC-developed baseline scenario and a BHC-developed stress scenario.
In connection with CapPR 2013, the Federal Reserve evaluated each BHC's capital plan submission, focusing on the comprehensiveness of the plan and the strength of the BHC's capital planning processes. Supervisors conducted quantitative assessments to evaluate the framework, approach and consistency of each BHC's stress test results, comparing results to historical performance and peer institutions. The Federal Reserve delivered a supervisory response to each CapPR BHC based on an assessment of the comprehensiveness and quality of the BHC's capital plan and the post-stress capital ratios from the stress tests run by each BHC.
1. The capital plan rule is codified at 12 CFR 225.8. Asset size is measured over the previous four calendar quarters as reported on the FR Y-9C regulatory report. Return to text
2. 12 CFR part 252, subparts F and G. Return to text
3. 12 CFR 225.8(d)(2). Return to text
9. See "Comprehensive Capital Analysis and Review 2013 Summary Instructions and Guidance," www.federalreserve.gov/newsevents/press/bcreg/20121109b.htm. Return to text
10. The 18 BHCs required to submit a capital plan for CCAR 2013 were 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; and Wells Fargo & Company. These 18 BHCs also participated in the 2012 and 2011 CCARs and the 2009 Supervisory Capital Assessment Program (SCAP). Although MetLife, Inc. had participated in the 2009 SCAP and previous CCAR exercises, it did not participate in CCAR this year because it was in the process of deregistering as a bank holding company when the exercise began and has now completed that process. Return to text
11. 12 USC 5365(i)(2); 12 CFR part 252, subpart G. The Federal Reserve published a summary of the results of the Dodd-Frank Act supervisory stress test on March 7, 2013. See Board of Governors of the Federal Reserve Board (2013), "Dodd-Frank Act Stress Tests 2013: Supervisory Stress Test Methodology and Results," report (Washington: Board of Governors, March 7), www.federalreserve.gov/newsevents/press/bcreg/DFAST_2013_results_20130307.pdf. Return to text