SR 15-18:
Federal Reserve Supervisory Assessment of Capital Planning and Positions for Firms Subject to Category I Standards
OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551
DIVISION OF BANKING
SUPERVISION AND REGULATION
December 18, 2015
Revised January 15, 2021
Attachment Reposted January 15, 2021
In January 2021, this letter was modified to apply to U.S. bank holding companies that are subject to Category I standards under the Board's tailoring framework.1 These applicability modifications align with the Board's tailoring rules. See 84 Fed. Reg. 59032 (November 1, 2019) for more information.
TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK
Federal Reserve Supervisory Assessment of Capital Planning and Positions for Firms Subject to Category I Standards
Applicability: This guidance applies only to U.S. bank holding companies that are subject to Category I standards under the Board’s tailoring framework.
The Federal Reserve is issuing this letter to explain its supervisory expectations for capital planning at firms subject to Category I standards, consistent with the broad supervisory expectations set forth in SR letter 12-17/CA letter 12-14, "Consolidated Supervision Framework for Large Financial Institutions."2 Capital is central to a firm's ability to absorb unexpected losses and continue to lend to creditworthy businesses and consumers. Therefore, a firm's processes for managing and allocating its capital resources are critical to its financial strength and resiliency, and also to the stability and effective functioning of the U.S. financial system. The attached guidance provides the Federal Reserve's core capital planning expectations for firms subject to Category I standards, building upon the capital planning requirements in the Federal Reserve's capital plan rule and stress test rules.3, 4
The guidance outlines capital planning expectations for:
- Governance
- Risk management
- Internal controls
- Capital policy
- Scenario design
- Projection methodologies
Further, the attached guidance includes several appendices that detail supervisory expectations on a firm's capital planning process. This guidance largely consolidates the Federal Reserve's existing capital planning guidance, including:
- Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice (August 2013)5
- Comprehensive Capital Analysis and Review 2015 Summary Instructions and Guidance (October 2014)6
- Instructions for the Capital Assessments and Stress Testing information collection (Reporting Form FR Y-14A), (OMB No. 7100-0341)7
- SR letter 11-7, "Supervisory Guidance on Model Risk Management"
- SR letter 12-7, "Supervisory Guidance on Stress Testing for Banking Organizations with More Than $10 Billion in Total Consolidated Assets"
- SR letter 12-17/CA letter 12-14, "Consolidated Supervision Framework for Large Financial Institutions"
Applicability
This guidance applies to U.S. bank holding companies subject to Category I standards under the Board's tailoring framework.8, 9
The Federal Reserve has different expectations for sound capital planning and capital adequacy depending on the size, scope of operations, activities, and systemic importance of a firm. The Federal Reserve has separate guidance, set forth in SR letter 15-19, that clarifies that expectations for firms subject to Category I standards are higher than the expectations for firms subject to Category II or III standards.
Federal Reserve Banks should distribute this letter to firms subject to Category I standards in their districts as well as to appropriate supervisory staff. Questions regarding this guidance may be directed to the following Board staff: Lisa Ryu, Associate Director, at (202) 263-4833, or David Palmer, Senior Supervisory Financial Analyst, at (202) 452-2904. In addition, questions may be sent to the secure CCAR Communications mailbox or via the Board's public website.10
signed by
Michael S. Gibson
Director
Division of Banking
Supervision and Regulation
- SR letter 99-18, “Assessing Capital Adequacy in Relation to Risk at Large Banking Organizations and Others with Complex Risk Profiles”
- SR letter 09-4, “Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies” Note: This SR letter is superseded for a U.S. bank holding company or an intermediate holding company of a foreign banking organization with $50 billion or more in total consolidated assets.
- SR letter 15-3, “FFIEC Information Technology Examination Handbook”
- SR letter 14-8, “Consolidated Recovery Planning for Certain Large Domestic Bank Holding Companies”
- SR letter 14-1, “Heightened Supervisory Expectations for Recovery and Resolution Preparedness for Certain Large Bank Holding Companies”
- SR letter 13-19 / CA letter 13-21, “Guidance on Managing Outsourcing Risk”
- SR letter 13-1 / CA letter 13-1, “Supplemental Policy Statement on the Internal Audit Function and Its Outsourcing”
- SR letter 12-17/CA letter 12-14, “Consolidated Supervision Framework for Large Financial Institutions”
- SR letter 12-7, “Supervisory Guidance on Stress Testing for Banking Organizations with More Than $10 Billion in Total Consolidated Assets”
- SR letter 11-7, “Supervisory Guidance on Model Risk Management”
Notes:
1. This guidance previously applied to U.S. bank holding companies and intermediate holding companies of foreign banking organizations that are either: (i) subject to the Federal Reserve's Large Institution Supervision Coordinating Committee (LISCC) framework (referred to as a "LISCC Firm" in this letter) or (ii) total consolidated assets of $250 billion or more or consolidated total on-balance sheet foreign exposure of $10 billion or more. Return to text
2. The term "capital planning process" used in this document, which aligns with terminology in SR 12-17/ CA 12‑14, is equivalent to the term "capital adequacy process" used in other Federal Reserve documents. Return to text
3. For the capital plan rules, refer to section 225.8 of Regulation Y (12 CFR 225.8) and section 238.170 of Regulation LL (12 CFR 238.170). Regulation Q (12 CFR part 217) establishes minimum capital requirements and overall capital adequacy standards for Federal Reserve-regulated institutions. Regulation YY (12 CFR part 252) and Regulation LL (12 CFR part 238) establish capital stress testing requirements for bank holding companies and covered savings and loan holding companies, respectively, with total consolidated assets of $100 billion or more. Return to text
4. With the issuance of this letter, SR letter 99-18, "Assessing Capital Adequacy in Relation to Risk at Large Banking Organizations and Others with Complex Risk Profiles," is superseded. In addition, SR letter 09-4, "Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies," is superseded with respect to firms subject to this guidance. Return to text
5. Available at: http://www.federalreserve.gov/bankinforeg/bcreg20130819a1.pdf. Return to text
6. Available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20141017a1.pdf. Return to text
7. Available at: http://www.federalreserve.gov/apps/reportforms/reportdetail.aspx?sOoYJ+5BzDa2AwLR/gLe5DPhQFttuq/4. Return to text
8. Firms subject to Category I standards are U.S. global systemically important bank holding companies (GSIBs). Return to text
9. This guidance does not apply to nonbank financial companies designated by the Financial Stability Oversight Council for supervision by the Board of Governors. Return to text
10. See: http://www.federalreserve.gov/apps/contactus/feedback.aspx. Return to text