March 11, 2015

Federal Reserve releases results of Comprehensive Capital Analysis and Review (CCAR)

For release at 4:30 p.m. EDT

The Federal Reserve on Wednesday announced it has not objected to the capital plans of 28 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). One institution received a conditional non-objection based on qualitative grounds, and the Federal Reserve objected to two firms' plans on qualitative grounds.

In its fifth year, CCAR 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 and issuances. Strong capital levels act as a cushion to absorb losses and help better ensure that banking organizations have the ability to lend to households and businesses even in times of stress.

When considering an institution's capital plan, the Federal Reserve considers both quantitative and qualitative factors. These include, respectively, a firm's projected capital ratios under a hypothetical scenario of severe economic and financial market stress and the strength of the firm's capital planning processes. The Federal Reserve may object to a capital plan based on quantitative or qualitative concerns. After the Federal Reserve objects to a capital plan, the institution may not make any capital distribution unless expressly permitted by the Federal Reserve.

"Our capital plan review helps ensure that the capital distribution plans of large banks will not compromise their ability to continue lending to businesses and households even during a period of serious financial stress," Federal Reserve Gov. Daniel K. Tarullo said. "It also provides a structured assessment of their risk management capacities."

The Federal Reserve did not object to the capital plans of Ally Financial, Inc.; American Express Company; The Bank of New York Mellon Corporation; BB&T Corporation; BBVA Compass Bancshares, Inc.; BMO Financial Corp.; Capital One Financial Corporation; Citigroup, Inc.; Citizens Financial Group; Comerica Incorporated; Discover Financial Services; Fifth Third Bancorp; Goldman Sachs Group, Inc.; HSBC North America Holdings, Inc.; Huntington Bancshares, Inc.; JP Morgan Chase & Co.; Keycorp; M&T Bank Corporation; Morgan Stanley; MUFG Americas Holdings Corporation; Northern Trust Corp.; The PNC Financial Services Group, Inc.; Regions Financial Corporation; State Street Corporation; SunTrust Banks, Inc.; U.S. Bancorp; Wells Fargo & Company; and Zions Bancorporation. Goldman Sachs Group, Inc., JP Morgan Chase & Co., and Morgan Stanley met minimum capital requirements on a post-stress basis after submitting adjusted capital actions.

The Federal Reserve did not object to the capital plan of Bank of America Corporation, but is requiring the institution to submit a new capital plan by the end of the third quarter to address certain weaknesses in its capital planning processes. The Federal Reserve objected to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA on qualitative concerns. The Federal Reserve did not object to any plans based on quantitative grounds.

U.S. firms have substantially increased their capital since the first round of stress tests led by the Federal Reserve in 2009. The common equity capital ratio--which compares high-quality capital to risk-weighted assets--of the 31 bank holding companies in the 2015 CCAR has more than doubled from 5.5 percent in the first quarter of 2009 to 12.5 percent in the fourth quarter of 2014, reflecting an increase in common equity capital of more than $641 billion to $1.1 trillion during the same period.

The firms, collectively, are projecting that they will continue building capital from the second quarter of 2015 through the second quarter of 2016. The 31 institutions tested this year represent more than 80 percent of assets held by domestic bank holding companies, or $14 trillion as of the fourth quarter of 2014.

Also on Wednesday, the Federal Reserve released corrected results from last week's Dodd-Frank Act stress tests. Four participating firms submitted incorrect data, which affected their starting tier 1 common capital ratios and by extension their post-stress minimum and ending tier 1 common capital ratios in the severely adverse and adverse scenarios. The corrections led to increases in these ratios for the affected firms.

Comprehensive Capital Analysis and Review 2015: Assessment Framework and Results (PDF) | HTML

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Last Update: March 11, 2015