Dodd-Frank Act Stress Test 2019: Supervisory Stress Test Methodology March - 2019
Figure 1. Projecting net income and regulatory capital
A flowchart with five steps, leading from one to the next.
- Net interest income plus noninterest income, minus noninterest expense, equals pre-provision net revenue (PPNR).
(Note: PPNR includes income from mortgage servicing rights and losses from operational-risk events and OREO costs.)
- PPNR plus other revenue, minus provisions, minus AFS/HTM securities losses, minus HFS/FVO loan losses, minus trading and counterparty losses, equals pre-tax net income.
(Note: Change in the allowance for loan and lease losses, plus net charge-offs, equals provisions.)
- Pre-tax net income minus taxes, minus income attributable to minority interest, minus change in the valuation allowance, equals after-tax net income.
- After-tax net income minus net distributions to common and preferred shareholders and other net reductions to shareholder's equity from DFAST assumptions plus other comprehensive income, equals change in equity capital.
- Change in equity capital minus change in adjustments and deductions from regulatory capital, plus other additions to regulatory capital, equals change in regulatory capital.