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December 2020 Stress Test Results BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM December 2020 Stress Test Results BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM This and other Federal Reserve Board reports and publications are available online at https://www.federalreserve.gov/publications/default.htm. To order copies of Federal Reserve Board publications offered in print, see the Board’s Publication Order Form (https://www.federalreserve.gov/files/orderform.pdf) or contact: Printing and Fulfillment Mail Stop K1-120 Board of Governors of the Federal Reserve System Washington, DC 20551 (ph) 202-452-3245 (fax) 202-728-5886 (email) Publications-BOG@frb.gov iii Preface The Federal Reserve promotes a safe, sound, and efficient banking and financial system that supports the growth and stability of the U.S. economy through its supervision of bank holding companies (BHCs), U.S. intermediate holding company (IHC) subsidiaries of foreign banking organizations, savings and loan holding companies, and state member banks. The Federal Reserve has established frameworks and programs for the supervision of the largest and most complex financial institutions to achieve its supervisory objectives, incorporating lessons learned from the 2007–09 financial crisis and in the period since. As part of these supervisory frameworks and programs, the Federal Reserve through its supervisory stress test assesses whether BHCs and U.S. IHCs with $100 billion or more in total consolidated assets (together, firms) are sufficiently capitalized to absorb losses during stressful conditions while meeting obligations to creditors and counterparties and continuing to be able to lend to households and businesses. The Federal Reserve Board first adopted rules implementing these frameworks and programs in October 2012 and most recently modified these rules in March 2020.1 1 On October 10, 2019, the Board finalized a rule to amend its prudential standards to exempt firms with total consolidated Each year, the Federal Reserve publicly discloses the results of its supervisory stress test, as implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. This document includes the results of the Federal Reserve’s December 2020 supervisory stress test for the capital plan resubmission, including revenues, expenses, losses, pre-tax net income, and capital ratios projected under adverse economic and financial conditions. These results are projected using a set of models developed or selected by the Federal Reserve that take as inputs the Federal Reserve’s scenarios and firm-provided data on their financial conditions and risk characteristics. assets of less than $100 billion from the supervisory stress test and to subject certain firms with total consolidated assets between $100 billion and $250 billion to the supervisory stress test requirements on a two-year cycle (84 Fed. Reg. 59032 (Nov. 1, 2019)). Firms with $250 billion or more in total consolidated assets or material levels of other risk factors remain subject to the supervisory stress test requirements on an annual basis. On March 4, 2020, the Board approved a rule to simplify its capital rules for large firms through the establishment of the stress capital buffer requirement, which integrates the Board’s stress test results with its non-stress capital requirements (85 Fed. Reg. 15576 (Mar. 18, 2020)). v Contents Executive Summary ................................................................................................................ 1 Summary of Results .................................................................................................................... 2 Comparison to the Sensitivity Analysis ......................................................................................... 3 Overview .................................................................................................................................... 3 Supervisory Scenarios ............................................................................................................ 5 Severely Adverse Scenario .......................................................................................................... 5 Alternative Severe Scenario ......................................................................................................... 8 Global Market Shock and Counterparty Default Components ........................................................ 9 Supervisory Stress Test Framework and Model Methodology .............................. 15 Overview of Modeling Framework .............................................................................................. 15 Capital Action Assumptions ....................................................................................................... 19 Data Inputs ............................................................................................................................... 19 Supervisory Stress Test Results ......................................................................................... 23 Severely Adverse Scenario ........................................................................................................ 23 Alternative Severe Scenario ....................................................................................................... 38 Appendix A: Supervisory Scenarios ................................................................................ 51 Notes Regarding Scenario Variables .......................................................................................... 58 Appendix B: Firm-Specific Results .................................................................................. 61 Appendix C: Additional Aggregate Results ................................................................ 129 Appendix D: Technical Information about the Capital Plan Resubmission and Distribution Limitations ............................................................... 143 1 Executive Summary In June, the Federal Reserve released the results of its annual supervisory stress test2 and the results of a sensitivity analysis, which assessed the resilience of firms under a range of plausible downside scenarios stemming from the outbreak of the coronavirus and the imposition of associated containment measures (“COVID event”).3 Those results indicated that the banking sector was sufficiently capitalized and could continue lending to businesses and households during a severe recession. Figure 1. Net income and net common capital distributions 150 120 90 60 However, material uncertainty was present at the time regarding the trajectory of the economic recovery and its effects on the financial health of banking organizations. As a result, the Board required the 33 firms to resubmit their capital plans and limited the capital distributions by these firms in order to preserve capital and support lending. The Board also announced that it would conduct an additional stress test in late 2020. Net income declined in 2020 relative to 2019, but firms reduced net common capital distributions and retained more of that income (see figure 1). The decline in capital distributions is partly due to actions taken by the Board to limit capital distributions for the third and fourth quarters of 2020. Combined with firms’ voluntary capital distribution reductions, these actions helped to maintain, and slightly increase, aggregate capital levels during a year in which firms also built loss absorbing capacity by more than doubling loan-loss reserves. The aggregate common equity tier 1 capital (CET1) ratio increased from 12.0 percent in the fourth quarter of 2 3 See Board of Governors of the Federal Reserve System, DoddFrank Act Stress Test 2020: Supervisory Stress Test Results (Washington: Board of Governors, June 2020), https://www .federalreserve.gov/publications/files/2020-dfast-results20200625.pdf. See Board of Governors of the Federal Reserve System, Assessment of Bank Capital during the Recent Coronavirus Event (Washington: Board of Governors, June 2020), https://www .federalreserve.gov/publications/files/2020-sensitivity-analysis20200625.pdf. Billions of dollars 30 0 2019:Q1–2019:Q3 Net income 2020:Q1–2020:Q3 Net common capital distributions Note: Sample consists of the firms included in the December 2020 stress test. Source: FR Y-9C. 2019 to 12.2 percent in the second quarter of 2020 and to 12.7 percent by the third quarter of 2020. The results of the December 2020 stress test show that firms maintain strong capital levels under two hypothetical severe scenarios. The scenarios feature severe global downturns with substantial stress in financial markets that serve to capture a broad set of severe but plausible risks.4 Projected losses under both scenarios exceed $600 billion, considerably larger than in the June 2020 stress test. However, the large reserve buildup during the first half of the year helped cushion some of the increase in losses, and all firms remain above their minimum risk-based capital requirements. Table 1 shows the starting and poststress minimum ratios for both scenarios in aggregate (see appendix B for the full results for each firm). Macroeconomic and financial conditions have generally improved since June 2020. Despite these improvements, future economic conditions and the 4 See the “Supervisory Scenarios” section below. 2 December 2020 Stress Test Results Table 1. Aggregate capital ratios, actual, projected 2020:Q3–2022:Q3, and regulatory minimums Percent Stressed minimum capital ratios Regulatory ratio Minimum regulatory capital ratios Actual 2020:Q2 Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Severely adverse Alternative severe 9.6 11.3 14.0 6.4 5.2 9.7 11.4 14.1 6.4 5.2 12.2 13.8 16.4 7.9 7.4 4.5 6.0 8.0 4.0 3.0 Note: The supplementary leverage ratio is calculated only for firms subject to Category I, II, or III standards. ultimate path of the current recovery remain uncertain, depending on the course of the COVID event. In light of this uncertainty, the Board is extending its limits on capital distributions into the first quarter of 2021, with certain modifications. In particular, for all firms, the Board will • continue to limit dividend payments based on recent income, and vidual firms, do not include the effect of common stock dividend distributions. For the December stress test, aggregate losses over the projection horizon at the 33 firms are projected to be $629 billion under the severely adverse scenario and $612 billion under the alternative severe scenario. For the June stress test, total losses under the severely adverse scenario were $550 billion for the same 33 firms. • limit share repurchases based on recent income. These restrictions will apply into the first quarter of 2021 and may be extended by the Board. Despite higher loan losses compared to the June stress test, projected provisions for loan losses are smaller. Provisions are projected to be $429 billion under the severely adverse scenario and $440 billion Summary of Results Figure 2. Aggregate common equity capital ratio Percent 12 10 8 6 2020:Q1 2019:Q1 2018:Q1 2017:Q1 2016:Q1 2015:Q1 2014:Q1 2013:Q1 2012:Q1 2011:Q1 Under Basel I risk-weighted assets Under Basel III risk-weighted assets 2010:Q1 In the severely adverse scenario, the aggregate CET1 ratio falls from an actual value of 12.2 percent in the second quarter of 2020 to a projected minimum of 9.6 percent before rising to 10.2 percent at the end of the third quarter of 2022. In the alternative severe scenario, the aggregate CET1 ratio declines to a minimum of 9.7 percent, but rises to 9.9 percent at the end of the third quarter of 2022. The declines in capital ratios, both in the aggregate and for indi- 14 2009:Q1 The results of the December stress test suggest that, in the aggregate, the 33 firms would experience substantial losses and lower revenues under the hypothetical recessions but could continue lending to creditworthy businesses and households. This is due, in large part, to the substantial buildup of capital since the 2007–09 financial crisis (see figure 2) and more than a doubling of loan-loss reserves during the first half of 2020. In aggregate, capital ratios remain well above their required minimum levels throughout the projection horizon under both scenarios. Note: The Federal Reserve’s evaluation of a firm’s common equity capital was initially measured using a tier 1 common capital ratio but now is evaluated using a common equity tier 1 capital ratio, which was introduced into the regulatory capital framework with the implementation of Basel III to replace Basel I. Not all of the 33 firms included in the December 2020 stress test reported data for all periods since 2009. Source: FR Y-9C. 3 under the alternative severe scenario, while provisions were $489 billion for the June stress test. This difference reflects a significant increase in firms’ loan-loss reserves since the beginning of the year. If firms had maintained the same level of loan-loss reserves as in the fourth quarter of 2019, projected provisions would be about $100 billion higher for both scenarios in this stress test. economic and financial conditions as of September 2020. For example, the unemployment rate in April, when the sensitivity analysis scenarios were designed, was 14.7 percent, and the sensitivity analysis added further stress to that figure; by September, the unemployment rate had declined to 7.9 percent, which was the base to which further stress was added for the December stress test. Lower provisions are offset by lower aggregate projected pre-provision net revenue (PPNR) than in the June stress test. PPNR in the December stress test under the severely adverse scenario and alternative severe scenario is projected to be $371 billion and $363 billion, respectively. For the June stress test, PPNR under the severely adverse scenario was $430 billion for the same 33 firms. These decreases are partly attributable to a flatter yield curve in both scenarios, which reduces net interest margins. Loan losses under the December stress test scenarios are higher compared to the June stress test scenario, but are lower than losses under the alternative downside scenarios in the sensitivity analysis, due to the higher severity of those scenarios. Aggregate projected loan losses under the alternative downside scenarios ranged from around $560 billion to just over $700 billion, compared to $514 billion and $491 billion under the severely adverse and alternative severe scenarios for the December stress test, respectively. Provisions for loan losses and PPNR are the main drivers of pre-tax net income. Lower projected provisions approximately offset reduced PPNR so that the projected decline in pre-tax net income is similar to that of the June stress test. The projected decline in pre-tax net income is 0.9 percent of average total assets for the severely adverse scenario and 1.1 percent for the alternative severe scenario, compared to a decline of 1.1 percent in the June stress test. The minimum CET1 ratio fell to between 7.7 and 9.5 percent under the various scenarios considered in the sensitivity analysis. This range is lower than the December stress test’s projected minimum ratios of 9.6 and 9.7 percent under the severely adverse and alternative severe scenarios, respectively. The difference is partly attributable to the increase in loan-loss reserves during the first half of 2020. Further details of the results are provided in the “Supervisory Stress Test Results” section of this report, which are presented both in the aggregate and for individual firms. Overview Comparison to the Sensitivity Analysis The results from the December stress test, while similar to those of the June stress test, are less severe than the sensitivity analysis results published earlier this year. The sensitivity analysis explored a set of alternative downside scenarios, which were designed in early April and reflected the wide range of projections at the time by professional forecasters for key macroeconomic indicators, such as the unemployment rate and gross domestic product (GDP). In contrast, the December stress test scenarios were developed as plausible but severe, given the macro- This report provides • details of the supervisory severely adverse and alternative severe scenarios used in the December stress test; • an overview of the analytical framework and methods used to generate the Federal Reserve’s projected results, highlighting several changes from the June stress test;5 • additional details about the Federal Reserve’s assumptions in this supervisory stress test; and 5 See Board of Governors of the Federal Reserve System, DoddFrank Act Stress Test 2020: Supervisory Stress Test Methodology (Washington: Board of Governors, March 2020), https:// www.federalreserve.gov/publications/files/2020-marchsupervisory-stress-test-methodology.pdf. 4 December 2020 Stress Test Results • the results of the supervisory stress test under the severely adverse and alternative severe scenarios for the firms that participated in the December stress test, presented both in the aggregate and for individual firms.6 6 The 33 firms that participated in the December stress test are Ally Financial Inc.; American Express Company; Bank of America Corporation; The Bank of New York Mellon Corporation; Barclays US LLC; BMO Financial Corp.; BNP Paribas USA, Inc.; Capital One Financial Corporation; Citigroup Inc.; Citizens Financial Group, Inc.; Credit Suisse Holdings (USA), Inc.; DB USA Corporation; Discover Financial Services; Fifth Third Bancorp; The Goldman Sachs Group, Inc.; HSBC North America Holdings Inc.; Huntington Bancshares Incorporated; JPMorgan Chase & Co.; KeyCorp; M&T Bank Corporation; Morgan Stanley; MUFG Americas Holdings Corporation; Northern Trust Corporation; The PNC Financial Services Group, Inc.; RBC US Group Holdings LLC; Regions Financial Corporation; Santander Holdings USA, Inc.; State Street Corporation; TD Group US Holdings LLC; Truist Financial Corporation; U.S. Bancorp; UBS Americas Holding LLC; and Wells Fargo & Company. In addition to DB USA Corporation, DWS USA Corporation, a second U.S. intermediate holding company subsidiary of Deutsche Bank AG, was required to resubmit its capital plan. 5 Supervisory Scenarios On September 17, 2020, the Federal Reserve published the three supervisory scenarios for its December stress test: baseline, severely adverse, and alternative severe.7 This section describes the severely adverse and alternative severe scenarios that were used for the projections contained in this report. These scenarios were developed using the approach described in the Board’s Policy Statement on the Scenario Design Framework for Stress Testing (“Scenario Design Framework”).8 The severely adverse and alternative severe scenarios are not forecasts but rather hypothetical scenarios designed to assess the strength of banking organizations and their resilience to an unfavorable economic environment. Figure 3. Unemployment rate, 2014:Q1–2023:Q3 14 Percent Actual Severely adverse Alternative severe 12 10 8 6 4 Similar to the June stress test, the Federal Reserve applied a global market shock to the trading portfolio of 11 firms with large trading and private equity exposures and a largest counterparty default (LCPD) scenario component to 13 firms with substantial trading, processing, or custodial operations (see “Global Market Shock and Counterparty Default Components”). Severely Adverse Scenario Figures 3 through 8 illustrate the trajectories for some of the key variables describing U.S. economic activity and asset prices under the severely adverse scenario. 7 8 See Board of Governors of the Federal Reserve System, Supervisory Scenarios for the Resubmission of Capital Plans in the Fourth Quarter of 2020 (Washington: Board of Governors, September 2020), https://www.federalreserve.gov/newsevents/ pressreleases/files/bcreg20200917a1.pdf, for additional information and for the details of the supervisory scenarios. See 12 C.F.R. pt. 252, appendix A. 2023:Q1 2022:Q1 2021:Q1 2020:Q1 2019:Q1 2018:Q1 2017:Q1 2016:Q1 2015:Q1 0 2014:Q1 2 The December supervisory scenarios include trajectories for 28 variables. These include 16 variables that capture economic activity, asset prices, and interest rates in the U.S. economy and financial markets, and an additional three variables (real GDP growth, inflation, and the U.S./foreign currency exchange rate) for each of four foreign country blocs. Source: Bureau of Labor Statistics for historical data and Federal Reserve assumptions for the supervisory scenarios. The severely adverse scenario is characterized by a severe decline in global economic activity accompanied by financial market distress. Consistent with the Scenario Design Framework, under the severely adverse scenario, the U.S. unemployment rate climbs to a peak of 12½ percent in the fourth quarter of 2021 (see table A.5), a 3 percentage point increase relative to the initial level, the level in the third quarter of 2020.9 In line with the increase in the unemployment rate, real GDP falls 3¼ percent from the end of the third quarter of 2020 to its trough in the fourth quarter of 2021. The decline in activity is 9 The Scenario Design Framework suggests an increase in the unemployment rate in the range between 3 and 5 percentage points from its initial level, with the expectation that the Federal Reserve will select an increase from the lower end of the range when the unemployment rate is already elevated. Given the release of the scenarios late in the third quarter of 2020, the initial level from which the peak unemployment rate in the scenario was computed was based on the forecast from Blue Chip Economic Indicators for the third quarter of 2020. See Wolters Kluwer Legal and Regulatory Solutions, Blue Chip Economic Indicators. 6 December 2020 Stress Test Results Figure 4. Real Gross Domestic Product (GDP) growth rate, 2014:Q1–2023:Q3 Figure 6. National House Price Index, 2014:Q1–2023:Q3 225 25 Index level Percent 20 200 15 10 175 5 0 150 Actual Severely adverse Alternative severe -5 -10 125 2023:Q1 2022:Q1 2021:Q1 2020:Q1 2019:Q1 2018:Q1 2017:Q1 2016:Q1 2014:Q1 -35 2015:Q1 Source: Bureau of Economic Analysis for historical data and Federal Reserve assumptions for the supervisory scenarios. accompanied by a lower headline consumer price index (CPI) inflation rate, which quickly falls to an annual rate of about 1¼ percent in the fourth quarter of 2020, and then ranges from 1¼ percent to about 2¼ percent in the remaining quarters. In the later quarters of the scenario, the unemployment rate declines at a pace comparable with the paths of severely adverse scenarios used in previous Index level 2023:Q1 2022:Q1 2021:Q1 2020:Q1 2019:Q1 stress testing cycles. Over the scenario period, despite the reduction in the unemployment rate, the level of real GDP does not rise above the level in the baseline scenario. Consistent with the severe decline in real activity, the interest rate for 3-month Treasury bills remains near zero throughout the scenario period. The 10-year Treasury yield rises gradually from about ¼ percent during the fourth quarter of 2020 to about 1½ percent by the end of the scenario period. The result is a steepening of the yield curve over the scenario period. 7 Actual Severely adverse Alternative severe 35000 Source: CoreLogic for historical data (seasonally adjusted by Federal Reserve) and Federal Reserve assumptions for the supervisory scenarios. Figure 7. U.S. BBB corporate yield, 2014:Q1–2023:Q3 Figure 5. Dow Jones Total Stock Market Index, 2014:Q1–2023:Q3 40000 2018:Q1 -30 2017:Q1 100 2016:Q1 -25 2015:Q1 Actual Severely adverse Alternative severe -20 2014:Q1 -15 Actual Severely adverse Alternative severe Percentage yield 6 5 4 30000 3 25000 Source: Dow Jones for historical data and Federal Reserve assumptions for the supervisory scenarios. 2023:Q1 2022:Q1 2021:Q1 2020:Q1 2019:Q1 2018:Q1 2017:Q1 2016:Q1 2015:Q1 2023:Q1 2022:Q1 2021:Q1 2020:Q1 2019:Q1 2018:Q1 2017:Q1 0 2016:Q1 15000 2015:Q1 1 2014:Q1 20000 2014:Q1 2 Source: ICE Data Indices, LLC, used with permission for historical data and Federal Reserve assumptions for the supervisory scenarios. 7 The international component of this scenario features sharp slowdowns in all developed country blocs, leading to recessions in the euro area, the United Kingdom, and Japan. Developing Asia has only a mild slowdown in economic activity in the scenario. With the continued weakness in economic activity, all of the foreign economies included in the scenario experience sizable declines in their inflation rates during the scenario period. The U.S. dollar appreciates against the euro, the pound sterling, and the currencies of developing Asia, but depreciates slightly against the yen, reflecting flight-to-safety capital flows. Figure 8. U.S. Market Volatility Index (VIX), 2014:Q1–2023:Q3 90 Index level 80 Actual Severely adverse Alternative severe 70 60 50 40 30 2023:Q1 2022:Q1 2021:Q1 2020:Q1 2019:Q1 2018:Q1 2017:Q1 2016:Q1 2015:Q1 10 2014:Q1 20 Source: Chicago Board Options Exchange for historical data (converted to quarterly by Federal Reserve using the maximum quarterly close-of-day value) and Federal Reserve assumptions for the supervisory scenarios. Financial conditions in corporate and real estate lending markets are stressed significantly. The spread between yields on investment-grade corporate bonds and yields on long-term Treasury securities widens to almost 5¾ percentage points before narrowing to about 1¾ percentage points at the end of the scenario period. The spread between mortgage rates and 10-year Treasury yields widens to about 3½ percentage points early in 2021 before gradually falling to about 1¾ percentage points by the end of the scenario. Asset prices drop sharply in this scenario. Equity prices decline more than 30 percent from the third to the fourth quarter of 2020, as the economy contracts sharply, and the U.S. Market Volatility Index (VIX) rises to a peak level of 70. Equity prices continue to fall in the first half of 2021 before gradually recovering, leaving them down about 23 percent for the year. They continue to recover but close the scenario period down about 4¾ percent from their value in the initial quarter. House prices and commercial real estate (CRE) prices also experience large declines. House prices fall about 26¾ percent from the third quarter of 2020 to the third quarter of 2022; from that trough, they rise about 4½ percent during the rest of the scenario period. CRE prices decline 30 percent from the third quarter of 2020 to the fourth quarter of 2022 and stay close to that level for the remainder of the scenario period. Additional Key Features of the Severely Adverse Scenario Stresses in the corporate loan market were assumed to be more intense for lower-rated firms. Declines in aggregate U.S. residential and CRE prices were assumed to be concentrated in regions that have experienced rapid price gains over the past two years. Declines in prices of U.S. housing and CRE were also assumed to be representative of risks to house prices and CRE prices in foreign regions and economies that have experienced rapid price gains over the past two years. Moreover, conditions across Latin American economies were assumed to be comparable to the sharp slowdown in the United States. Comparison of the Current Severely Adverse Scenario and the June 2020 Severely Adverse Scenario The severely adverse scenario features a smaller increase in the unemployment rate in the United States compared with the June severely adverse scenario. However, the current severely adverse scenario starts from a significantly higher unemployment rate, reflecting current economic conditions. The smaller increase in the unemployment rate reflects the Scenario Design Framework, which calls for a smaller increase in the unemployment rate when the unemployment rate is already elevated. As of September 10, 2020, the consensus forecast from Blue Chip Economic Indicators had an unemployment rate of 9½ percent in the third quarter of 2020.10 Given the weak initial economic conditions, the Scenario Design Framework calls for a 3 percent10 See Wolters Kluwer Legal and Regulatory Solutions, Blue Chip Economic Indicators. 8 December 2020 Stress Test Results age point increase in the unemployment rate. Accordingly, the unemployment rate in the current severely adverse scenario reaches a peak of 12½ percent. Interest rates rise in the current scenario, given their low starting values, whereas they fell in the June scenario. Asset price declines are comparable with the declines in the June scenario. Alternative Severe Scenario This alternative scenario is consistent with a number of potential adverse events, including a series of second waves of the COVID event that are not synchronized across different regions of the United States and the rest of the world, and related structural changes in labor markets. Accordingly, the alternative severe scenario is characterized by a less-severe initial drop in global economic activity relative to the severely adverse scenario, and a subsequent recovery that is more sluggish. Financial market stress is comparable with the stress assumed in the severely adverse scenario. The alternative severe scenario is designed to assess the strength and resilience of banking organizations to an alternative set of unfavorable economic conditions and is not a Federal Reserve forecast. Under the alternative severe scenario, the U.S. unemployment rate climbs to a peak of about 11 percent in the fourth quarter of 2020 (see table A.7). This 1½ percentage point increase in the unemployment rate departs from the Scenario Design Framework, which would call for the unemployment rate to rise at least 3 percentage points and to peak between the sixth and the eighth quarter of the scenario.11 The unemployment rate stays at its 11 percent peak through the fourth quarter of 2021. By that quarter, the unemployment rate is about 4½ percentage points higher than in the baseline scenario, but 1½ percentage points lower than in the severely adverse scenario. However, by the end of the scenario period, the relationship with the severely adverse scenario is reversed: the unemployment rate in the alternative severe scenario is 9 percent in the third quarter of 2023, about 1½ percentage points higher than in the severely adverse scenario. 11 The approach described in the Scenario Design Framework includes the ability to incorporate salient risks, as might be required by unusual economic circumstances. Accordingly, the alternative severe scenario is characterized by a less-severe initial increase in the U.S. unemployment rate than called for by the Scenario Design Framework, but this increase is also more persistent. Consistent with the increase in the unemployment rate, real GDP falls at an annualized rate of 9 percent in the fourth quarter of 2020 and then rises about 2 percent in 2021. Real GDP growth picks up over the remainder of the scenario period. The decline in activity is accompanied by a lower headline CPI inflation rate, which quickly falls to an annual rate of about 1 percent in the fourth quarter of 2020, and then is relatively steady over the rest of the 13-quarter period, ranging from 1¾ to 2¼ percent. In line with the prolonged weakness in real activity, the interest rate for 3-month Treasury bills remains near zero throughout the scenario, which is identical to the path assumed in the severely adverse scenario. The 10-year Treasury yield rises gradually from ¼ percent during the third quarter of 2020 to 1¾ percent by the end of the scenario period. The result is a slightly greater steepening of the yield curve over the scenario period than in the severely adverse scenario. Financial conditions in corporate and real estate lending markets are stressed significantly. The spread between yields on investment-grade corporate bonds and yields on long-term Treasury securities widens gradually to about 5¾ percentage points in the third quarter of 2021 before falling to 2¾ percentage points at the end of the scenario period, an increase of 1 percentage point relative to the third quarter of 2020 and ¾ percentage point higher than assumed in the severely adverse scenario. The spread between mortgage rates and 10-year Treasury yields widens to about 3¼ percentage points in the fourth quarter of 2020; it remains near this level through the fourth quarter of 2021 before gradually declining, and reaches 2 percentage points at the end of the scenario period. This end point is ¼ percentage point higher than in the severely adverse scenario, reflecting the persistently weaker level of activity assumed in this alternative scenario. Asset prices drop sharply in this scenario. Equity prices remain depressed longer than in the severely adverse scenario, bottoming out at the end, rather than the middle, of 2021. They fall about 16¼ percent from the third to the fourth quarter of 2020 as the economy contracts; this decline in equity prices is accompanied by a rise in the VIX, which reaches a peak of 70. Equity prices continue to fall through 2021, and at the end of 2021 are almost 50 percent lower than in the third quarter of 2020. They recover through the rest of the scenario period and end the scenario down about 13½ percent from the third 9 quarter of 2020. The VIX gradually decreases to 28 by the end of the scenario period. House prices and CRE prices also experience large overall declines. House prices fall 27 percent through the fourth quarter of 2022 and recover 3¾ percent through the rest of the scenario period, a path of house prices similar to the path in the severely adverse scenario. CRE prices decline 30 percent through the end of 2022 and stay close to that level for the remainder of the scenario, a path that matches the one in the severely adverse scenario. In line with domestic developments, the international component of this scenario features a less-severe initial contraction in global economic activity than in the severely adverse scenario, but a less-robust recovery thereafter. With the continued weakness in economic activity, all of the foreign economies included in the scenario experience sizable declines in their inflation rates during the scenario period. As in the severely adverse scenario, the U.S. dollar initially appreciates against the euro, the pound sterling, and the currencies of developing Asia, but depreciates slightly against the yen, consistent with flight-tosafety capital flows. Additional Key Features of the Alternative Severe Scenario Stresses in the corporate loan market were assumed to be more intense for lower-rated firms. Declines in aggregate U.S. residential and CRE prices were assumed to be concentrated in regions that have experienced rapid price gains over the past two years. Declines in prices of U.S. housing and CRE were also assumed to be representative of risks to house prices and CRE prices in foreign regions and economies that have experienced rapid price gains over the past two years. Moreover, conditions across Latin American economies were assumed to be comparable to the sharp slowdown in the United States. analysis released in June, albeit the rise in the unemployment rate envisaged in the new scenario is smaller but more persistent. These changes in the peak of the unemployment rate in the alternative severe scenario are in line with revisions to the forecasts of professional forecasters since June. Data released for the end of the second quarter and the first part of the third quarter of 2020 have generally led professional forecasters to revise downward the level of the unemployment rate expected to prevail during the remainder of 2020 and have significantly compressed the range of forecasts. Comparison of the Alternative Severe Scenario and the June 2020 Severely Adverse Scenario The June severely adverse scenario was designed and published before the onset of the COVID event. The alternative severe scenario features a smaller increase in the unemployment rate in the United States compared with the June severely adverse scenario. However, the alternative severe scenario starts from a significantly higher unemployment rate, reflecting current economic conditions. The relatively smaller increase in the unemployment rate departs from the Scenario Design Framework, which would call for the unemployment rate to rise at least 3 percentage points and to peak between the sixth and the eighth quarter of the scenario. Moreover, the unemployment rate remains near its peak for a greater number of periods. On the financial side, asset price declines are broadly consistent with those in the June scenario. Global Market Shock and Counterparty Default Components In June 2020, the Federal Reserve used several scenarios for additional sensitivity analysis to explore vulnerabilities of firms related to the COVID event.12 The sources of stress considered in the alternative severe scenario are comparable to those for the W- and U-shaped scenarios for the sensitivity The global market shock is a set of hypothetical shocks to a large set of risk factors reflecting general market distress and heightened uncertainty. Firms with significant trading activity must consider the global market shock and recognize associated losses in the first quarter of the projection period. In addition, certain large and highly interconnected firms must apply the same global market shock when projecting losses under the LCPD scenario component.13 The global market shock is applied to asset positions held by the firms on a given as-of date. The 12 13 Comparison of the Alternative Severe Scenario and the Sensitivity Analysis Alternative Downside Scenarios The scenarios in that sensitivity analysis had a more rapid and more pronounced increase in the unemployment rate than what is suggested by the Scenario Design Framework. All firms that were subject to the global market shock and LCPD components for the June stress test are also subject to the same components for the December stress test. 10 December 2020 Stress Test Results as-of date for the December stress test global market shock is June 30, 2020. These shocks do not represent a forecast of the Federal Reserve. The design and specification of the global market shock differ from those for the macroeconomic scenarios for several reasons. First, profits and losses from trading and counterparty credit are measured in mark-to-market terms, while revenues and losses from traditional banking are generally measured using the accrual method. Another key difference is the timing of loss recognition: the global market shock affects the mark-to-market value of trading positions and counterparty credit losses in the first quarter of the projection horizon; this timing is based on an observation that market dislocations can happen rapidly and unpredictably under stress conditions. Applying the global market shock in the first quarter of the projection horizon ensures that potential losses from trading and counterparty exposures are incorporated into trading firms’ capital ratios at all points over the projection period. The global market shock component is specified by a large set of risk factors that include, but are not limited to, • equity prices of key developed markets and developing and emerging market nations to which trading companies may have exposure, along with selected points along term structures of implied volatilities; • foreign exchange rates of most major and some minor currencies, along with selected points along term structures of implied volatilities; • selected-maturity sovereign debt yields (e.g., Treasury yields), swap rates, and other key rates for key developed markets and for developing and emerging market nations to which trading companies may have exposure; • selected maturities and expiries of implied volatilities that are key inputs to the pricing of interest rate derivatives; • selected expiries of futures prices for energy products, including crude oil (differentiated by country of origin), natural gas, and power; • selected expiries of futures prices for metals and agricultural commodities; and • credit spreads or prices for selected credit-sensitive products, including corporate bonds, credit default swaps, and loans by risk; non-agency residential mortgage-backed securities and commercial mortgage-backed securities by risk and vintage; sovereign debt; and municipal bonds. The Federal Reserve considers emerging and ongoing areas of financial market vulnerability in the development of the global market shock. This assessment of potential vulnerabilities is informed by financial stability reports; supervisory information; and internal and external assessments of potential sources of distress such as geopolitical, economic, and financial market events. The global market shock includes a standardized set of risk-factor shocks to financial market variables that apply to all firms with significant trading activity. Depending on the type of financial market vulnerabilities that the global market shock assesses, the market shocks could be based on a single historical episode, multiple historical periods, hypothetical (but plausible) events that are based on salient risks, or a hybrid approach comprising some combination of historical episodes and hypothetical events. A market shock based on hypothetical events may result in changes in risk factors that were not previously observed. Risk-factor shocks are calibrated based on assumed time horizons. The calibration horizons reflect a number of considerations related to the scenario being modeled. One important consideration is the liquidity characteristics of different risk factors, which vary based on the specified market shock narrative. More specifically, calibration horizons reflect the variation in the speed at which trading companies could reasonably close out, or effectively hedge, risk exposures in the event of market stress. The calibration horizons are generally longer than the typical time needed to liquidate assets under normal conditions because they are designed to capture the unpredictable liquidity conditions that prevail in times of stress, among other factors.14 For example, moreliquid asset classes, such as interest rates, foreign exchange, or public equities, are calibrated to shorter horizons, such as three months, while less-liquid assets, such as non-agency securitized products or private equities, have longer calibration horizons, such as 12 months. 14 Markets that are well-functioning and that appear to be very liquid can undergo abrupt changes in times of financial stress, and the timing and severity of changes in market liquidity may diverge from historical experience. For example, prior to the 2007–09 financial crisis, AAA-rated private-label residential mortgage-backed securities would likely have been considered highly liquid, but their liquidity deteriorated drastically during the crisis period. 11 Severely Adverse and Alternative Severe Scenarios Both the severely adverse and alternative severe scenarios include the same global market shock component, which incorporates widespread corporate defaults, ratings downgrades, severe declines in equity values, and increases in equity-implied volatility resulting from a worsening recession. Spreads widen sharply for non-investment grade and lower-rated investment grade bonds as ratingssensitive investors anticipate further downgrades and sell assets. Similarly, the leveraged loan market comes under considerable pressure from decreased demand. Open-ended mutual funds and exchangetraded funds (ETFs) that hold leveraged loans and high-yield bonds face heavy redemptions. Due to liquidity mismatches, mutual fund and ETF managers sell their most liquid holdings, leading to more extensive declines in the prices of fixed-income securities and other related assets. Price declines on leveraged loans flow through to the prices for collateralized loan obligations (CLOs). CLO prices suffer severe corrections associated with the devaluation of the underlying collateral and selling by concentrated holders desiring to reduce risk. The broad selloff of corporate bonds and leveraged loans spills over to prices for other risky credit and private equity instruments. Credit spreads for emerging market corporate credit and sovereign bonds widen due to a fall in risk appetite and flight-tosafety considerations. Asset values for private equity experience sizable declines as leveraged firms face lower earnings and a weak economic outlook. Municipal bond spreads widen in line with lower municipal tax revenues associated with the severe weakening of the U.S. economy. Given the current low level of short-term interest rates, short-term Treasury rates fall only slightly in this scenario. Longer-term Treasury rates fall as a result of flight-to-safety flows, but by a modest amount given the already-low interest rate environment. Short-term U.S. interbank lending rates rise as firms face increased funding pressure from a pullback in overnight lending, while longer-term swap rates fall in line with the declines in long-term Treasury rates. Flight-to-safety considerations cause the U.S. dollar to appreciate somewhat against the currencies of most advanced economies, with the Japanese yen as a notable exception. The yen appreciates against the U.S. dollar as investors view the yen as a safe-haven currency. Flight-to-safety considerations cause precious metals to experience an increase in value while non-precious metals prices fall as a result of lower demand that in turn results from global economic weakness. Comparison to the June 2020 Severely Adverse Scenario The global market shock component is broadly consistent with the June severely adverse scenario as both emphasize a heightened stress to highly leveraged markets that causes CLOs and private equity investments to experience large market value declines. Moreover, there is a general rise in shortterm interbank lending rates, highlighting a severe increase in funding pressures. A key difference is a milder decline in Treasury rates, which reflects that policy rates are now closer to zero. Shocks to equity values and short-term equity implied volatility are substantially larger. Energy price declines and related volatility increases are more pronounced, in general. The Swiss franc depreciates instead of appreciates against the U.S. dollar. Finally, stresses in the municipal bond market are more severe. Comparison to the Sensitivity Analysis Alternative Downside Scenarios The global market shock component reflects themes similar to those highlighted in the sensitivity analysis alternative downside scenarios. Key differences include a milder decline in Treasury rates, which reflects that policy rates are now closer to zero. Sovereign credit spreads widen less severely, particularly in the European periphery. In addition, changes to agency option-adjusted spreads are more modest given the increase in spread levels since the as-of date of the sensitivity analysis alternative downside scenarios. Counterparty Default Component for the Supervisory Severely Adverse and Alternative Severe Scenarios Firms with substantial trading or custodial operations are required to incorporate a LCPD scenario component for the resubmission of capital plans in the fourth quarter of 2020. The LCPD scenario com- 12 December 2020 Stress Test Results ponent involves the instantaneous and unexpected default of the firm’s largest counterparty.15 In connection with the LCPD scenario component, these firms are required to estimate and report the potential losses and related effects on capital associated with the instantaneous and unexpected default of the counterparty that would generate the largest losses across their derivatives and securities financing 15 In selecting its largest counterparty, a firm subject to the LCPD component will not consider certain sovereign entities (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) or qualifying central counterparties (QCCP). See definition of QCCP at 12 C.F.R. § 217.2. IHCs are not required to include any affiliate of the U.S. IHC as a counterparty. As in the U.S. final rule pursuant to the Dodd–Frank Act for Single Counterparty Credit Limits, an affiliate of the company includes a parent company of the counterparty, as well as any other firm that is consolidated with the counterparty under applicable accounting standards, including U.S. generally accepted accounting principles (GAAP) or International Financial Reporting Standards. activities, including securities lending and repurchase or reverse repurchase agreement activities. The LCPD scenario component is an add-on to the macroeconomic conditions and financial market environments specified in the supervisory severely adverse and alternative severe scenarios. The largest counterparty of each firm is determined by net stressed losses. Net stressed losses are estimated by applying the global market shock to revalue non-cash securities financing transactions (SFTs) (securities or collateral posted or received); and, for derivatives, the trade position and non-cash collateral exchanged. The as-of date for the December stress test LCPD scenario component is June 30, 2020—the same date as for the global market shock.16 16 As with the global market shock, losses will be assumed to occur in the first quarter of the projection horizon. 13 Box 1. Macroeconomic and Financial Conditions Since the Federal Reserve published the June stress test and sensitivity analysis results in the second quarter, macroeconomic and financial conditions have generally improved. Domestic and global policymakers responded to the deterioration in economic conditions with extraordinary measures to stabilize markets; to bolster the flow of credit to households, businesses, and communities; and to ensure that firms would remain resilient. The unemployment rate in the United States, which had been at a 50-year low at the start of 2020, soared to a post-war high of 14.7 percent in April before declining to 6.7 percent in November.1 However, future economic conditions remain unusually uncertain as prospects for many businesses and unemployed workers largely depend on the course of the COVID event. Banking Sector The COVID event continues to affect the banking sector through its effects on business and household borrowing, leverage, earnings, and liquidity. Corporate borrowing rose sharply in the first half of the year along with a corresponding decline in business revenues to service those liabilities. Within CRE, vacancy rates increased over the same period as retail, office, and hotel properties exhibited the highest vulnerability. Household debt was moderate relative to income at the beginning of the year, but a further increase in unemployment may negatively affect households’ abilities to repay that debt. In some cases, certain severely affected sectors are particularly vulnerable to additional outbreaks or lockdowns.2 Market functioning has improved and asset valuations have generally increased since the second quarter, partly due to policy actions, including asset repurchases and facilities set up under section 13(3) of the Federal Reserve Act. Nominal Treasury yields are at historically low levels, reflecting cautious expectations for economic growth and the Fed1 2 See U.S. Bureau of Labor Statistics (BLS), Unemployment Rate, https://fred.stlouisfed.org/series/UNRATE. The unemployment rate in leisure and hospitality increased to 15.0 percent in November from 4.9 percent a year earlier. Overall nonagricultural private employment saw a smaller increase from 3.2 to 6.5 percent over the same period. See BLS, The Employment Situation - November 2020, https://www.bls.gov/news.release/archives/empsit_12042020.htm. eral Reserve’s monetary policy stance. During the most severe periods of stress in March and April, spreads on corporate bonds over comparablematurity Treasury securities widened to their highest daily levels since the financial crisis. Leveraged loan spreads also widened in March and April, particularly for lower-rated loans. Since then, spreads declined substantially but remain quite elevated in heavily affected industries, such as in energy, airline, and leisure. Firm earnings severely contracted in the first half of the year due to an increase in loan loss provisions, current expected credit loss methodology (CECL) implementation, and decreased net interest margins. These downward pressures on earnings were partly offset by an increase in trading revenues for the largest firms as market-making and investment banking fee income increased. The second and third quarter surge in deposit inflows and the large buildup of reserve balances associated with the Federal Reserve’s large-scale asset purchases helped firms manage liquidity pressures and reduce funding risk. Firms started the year with strong levels of capital and have maintained them throughout 2020, despite a slight dip in the first quarter. Firms have also shored up their capital substantially since the 2007–09 financial crisis, supported by post-crisis regulatory reforms including stress testing. Uncertainty Remains Despite the rebound in economic activity and improving investor sentiment, uncertainty around the course of the COVID event remains high. This uncertainty reflects the possibility of continued virus outbreaks, future lockdown measures, and delays in vaccine production or distribution. While fiscal stimulus and loss mitigation programs provided to date have been a stabilizing factor for households and businesses,3 many households and businesses could face significant pressures if the COVID event worsens. 3 Scott R. Baker, R. A. Farrokhnia, Steffen Meyer, Michaela Pagel, and Constantine Yannelis, “Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments,” NBER Working Paper No. 27097 (Cambridge: National Bureau of Economic Research, May 2020), https://www.nber.org/papers/ w27097. 15 Supervisory Stress Test Framework and Model Methodology Overview of Modeling Framework The Federal Reserve estimates the effect of supervisory scenarios on the regulatory capital ratios of firms participating in the supervisory stress test by projecting net income and other components of regulatory capital for each firm over a nine-quarter projection horizon. Projected net income, adjusted for the effect of taxes, is combined with noncommon capital action assumptions and other components of regulatory capital to produce post-stress capital ratios. The Federal Reserve’s approach to modeling post-stress capital ratios generally follows U.S. generally accepted accounting principles (GAAP) and the regulatory capital framework.17 Figure 9 illustrates the framework used to calculate changes in net income and regulatory capital. Projecting Pre-tax Net Income The Federal Reserve calculates projected pre-tax net income for the firms subject to the supervisory stress test by combining projections of revenue, expenses, provisions for credit losses, and other losses, including • PPNR; • provisions for credit losses; • losses on loans held for sale (HFS) or for investment and measured under the fair-value option (FVO); • credit losses on investment securities in the available-for-sale (AFS) and held-to-maturity (HTM) portfolios;18 • losses on market risk exposures, credit valuation adjustment (CVA), and incremental default risk 17 18 See 12 C.F.R. pt. 217. For firms that have adopted Accounting Standards Update (ASU) 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses, in accordance with Financial Accounting Standards Board (FASB), Financial Instruments–Credit Losses (Topic 326), FASB ASU 2016-13 (Norwalk, Conn.: FASB, June 2016). Figure 9. Projecting net income and regulatory capital Net interest income + noninterest income – noninterest expense = pre-provision net revenue (PPNR) Note: PPNR includes income from mortgage servicing rights and losses from operational-risk events and other real-estate owned (OREO) costs. PPNR + other revenue – provisions for credit losses* – Available-for-sale (AFS) and Held-to-maturity (HTM) securities losses* – Held for sale (HFS) and Fair-value option (FVO) loan losses – trading and counterparty losses = pre-tax net income Note: Change in the allowances for credit losses + net charge-offs = provisions for credit losses Pre-tax net income – taxes – income attributable to minority interest – change in the valuation allowance = after-tax net income After-tax net income – payments on non-common capital + other comprehensive income (OCI) = change in equity capital Change in equity capital – change in adjustments and deductions from regulatory capital + other additions to regulatory capital = change in regulatory capital *For firms that have adopted Accounting Standards Update (ASU) 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses, in accordance with Financial Accounting Standards Board (FASB), Financial Instruments–Credit Losses (Topic 326), FASB ASU 2016-13 (Norwalk, Conn.: FASB, June 2016). (IDR) for firms subject to the global market shock; and • losses from a default of the largest counterparty for firms with substantial trading, processing, or custodial operations. The Federal Reserve projects these components of pre-tax net income using supervisory models that 16 December 2020 Stress Test Results take the Board’s scenarios and firm-provided data as inputs. The projections are based on the assumption that firms’ balance sheets remain unchanged throughout the projection period. Macroeconomic variables used in select supervisory models vary across geographic locations (e.g., by state or by county). The Federal Reserve projects the paths of these variables as a function of aggregate macroeconomic variables included in the Board’s scenarios. Pre-provision Net Revenue PPNR is defined as net interest income (interest income minus interest expense) plus noninterest income minus noninterest expense. Consistent with U.S. GAAP, the projection of PPNR includes projected losses due to operational-risk events and expenses related to the disposition of real-estateowned properties.19 The Federal Reserve models most components of PPNR using a suite of models that generally relate specific revenue and non-provision-related expenses to the characteristics of firms and to macroeconomic variables. These include eight components of interest income, seven components of interest expense, six components of noninterest income, and three components of noninterest expense. The Federal Reserve separately models losses from operational risk and other real-estate-owned (OREO) expenses. Operational risk is defined as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.”20 OREO expenses are those expenses related to the disposition of real-estate-owned properties and stem from losses on first-lien mortgages. Loan Losses and Provisions on the Accrual Loan Portfolio The Federal Reserve projects 13 quarters of losses on loans in the accrual loan portfolio using one of two modeling approaches: the expected-loss framework or the net charge-off approach. For certain loans, expected losses under the macroeconomic scenario are estimated by projecting the probability of default (PD), loss given default 19 20 PPNR projections do not include debt valuation adjustments, which are not included in regulatory capital. See Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards (Basel, Switzerland: BCBS, June 2004), 149, https://www.bis .org/publ/bcbs107.pdf. (LGD), and exposure at default (EAD) for each quarter of the projection horizon. Expected losses in each quarter are the product of these three components. Losses are modeled under the expected-loss framework for the following loan categories: • corporate loans, including graded commercial and industrial (C&I) loans, agricultural loans, domestic farm loans, international farm loans, loans to foreign governments, loans for purchasing and carrying securities, other non-consumer loans, and other leases • CRE loans, including domestic and international non-owner-occupied multifamily or nonfarm, nonresidential property loans and construction and land development loans • domestic first-lien residential mortgages • domestic home equity loans (HELs) and home equity lines of credit (HELOCs) • domestic credit cards • domestic auto loans The net charge-off approach projects losses over the projection horizon using models that capture the historical behavior of net charge-offs as a function of macroeconomic and financial market conditions and loan portfolio characteristics. The Federal Reserve models losses under the net charge-off approach for other consumer loans, business and corporate credit card loans, small-business loans, student loans, and international retail loans. Losses on the accrual loan portfolio flow into net income through provisions for loan and lease losses. Generally, provisions for loan and lease losses for each quarter equal projected loan losses for the quarter plus the change in the allowance needed to cover the subsequent four quarters of expected loan losses, taking into account the allowance established by the firm as of the effective date of the stress test.21 21 To reduce uncertainty, allow for better capital planning at affected firms, and gather additional information on the impact of CECL, the Federal Reserve maintained the framework used prior to the adoption of CECL for calculating allowances on loans in the December stress test, and plans to do so for 2021. See Board of Governors of the Federal Reserve System, “Statement on the Current Expected Credit Loss Methodology (CECL) and Stress Testing,” press release, December 21, 2018, https://www.federalreserve.gov/newsevents/pressreleases/files/ bcreg20181221b1.pdf. 17 The Federal Reserve assumes that the allowance at the end of each quarter covers projected loan losses for four quarters into the future. The supervisory estimate of the allowance at the start of the projection horizon, which is based on projected losses, may differ from a firm’s established allowance at the beginning of the projection horizon, which is based on the firm’s estimate of losses on the effective date of the stress test. Any difference between the supervisory calculation of the allowance and the firm’s reported allowance at the beginning of the projection horizon is linearly smoothed into the Federal Reserve’s provisions projection over the nine quarters. Losses on Loans Measured on a Fair-Value Basis Certain loans are accounted for on a fair-value basis instead of on an accrual basis. For example, if a loan is accounted for using the FVO, it is marked to market, and the accounting value of the loan changes as market risk factors and fundamentals change. Similarly, loans that are HFS are accounted for at the lower of cost or market value. The models for these asset classes project gains and losses on the firms’ FVO/HFS loan portfolios over the nine-quarter projection horizon, net of any hedges, by applying the scenario-specific path of interest rates and credit spreads to loan yields. Losses are modeled under this approach for the following loan categories: • FVO/HFS C&I loans • FVO/HFS CRE loans • FVO/HFS residential mortgages, student loans, auto loans, and credit cards changes in interest rates and other factors will result in unrealized gains or losses that are recognized in capital for some firms through other comprehensive income (OCI).23 Second, credit losses on the security may be recorded. With the exception of certain government-backed obligations, both AFS and HTM securities are at risk of incurring credit losses.24 The models project security-level credit losses, using as an input the projected fair value for each security over the nine-quarter projection horizon under the macroeconomic scenarios. Securities at risk of credit losses include the following securitizations and direct debt obligations: • corporate debt securities • sovereign debt securities (other than U.S. government obligations) • municipal debt securities • mortgage-backed, asset-backed, CLO, and collateralized debt obligation (CDO) securities Gains or Losses on the Fair Value of Available-for-Sale Securities The fair value of securities in the AFS portfolio may change in response to the macroeconomic scenarios. Under U.S. GAAP, unrealized gains and losses on AFS securities are reflected in accumulated OCI (AOCI) but do not flow through net income.25 Under the regulatory capital rule, AOCI must be incorporated into CET1 for certain firms.26 The incorporation of AOCI in regulatory capital is described in “Calculation of Regulatory Capital Ratios” below. Gains and losses on HFS C&I and CRE loans are estimated using a model specific to those asset classes. Gains and losses on FVO/HFS retail loans are modeled separately. 23 Losses on Securities in the Available-for-Sale and Held-to-Maturity Portfolios 24 The Federal Reserve estimates two types of losses on AFS or HTM securities related to investment activities.22 First, for securities classified as AFS, projected changes in the fair value of the securities due to 25 22 26 This portfolio does not include securities held for trading. Losses on these securities are projected by the model that projects gains and losses on trading exposures. OCI is accounted for outside of net income. Under regulatory capital rules, accumulated OCI (AOCI) that arises from unrealized changes in the value of AFS securities must be incorporated into CET1 for firms subject to the advanced approaches and other firms that do not opt out of including AOCI in regulatory capital. Certain government-backed securities, such as U.S. Treasuries, U.S. government agency obligations, U.S. government agency or government-sponsored enterprise mortgage-backed securities, Federal Family Education Loan Program student loan asset-backed securities, and pre-refunded municipal bonds, are assumed not to be subject to credit losses. Unrealized gains and losses on equity securities are recognized in net income and affect regulatory capital for all firms. See FASB, Financial Instruments—Overall (Subtopic 825-10), FASB ASU 2016-01 (Norwalk, Conn.: FASB, January 2016). The Board’s capital rule allows firms that are not subject to Category I or II standards to opt out of including AOCI in regulatory capital. 12 C.F.R. § 217.22(b)(2). 18 December 2020 Stress Test Results Unrealized gains and losses are calculated as the difference between each security’s fair value and its amortized cost. The amortized cost of each AFS security is equivalent to the purchase price of a debt security, which is periodically adjusted if the debt security was purchased at a price other than par or face value, has a principal repayment, or has an impairment recognized in earnings.27 OCI losses from AFS securities are computed directly from the projected change in fair value, taking into account credit losses and applicable interestrate hedges on securities. All debt securities held in the AFS portfolio are subject to OCI losses, including • U.S. Treasuries; • U.S. agency securities; • corporate debt securities; • sovereign debt securities; • municipal debt securities; and • mortgage-backed, asset-backed, CLO, and CDO securities. Losses on Trading and Private Equity Exposures and Credit Valuation Adjustment The trading and private equity model generates loss estimates related to trading and private equity positions under the global market shock. In addition, the global market shock is applied to firm counterparty exposures to generate losses due to changes in CVA. The trading and private equity model covers a wide range of firms’ exposures to asset classes such as public equity, foreign exchange, interest rates, commodities, securitized products, traded credit (e.g., municipals, auction rate securities, corporate credit, and sovereign credit), private equity, and other fairvalue assets. Loss projections are constructed by applying movements specified in the global market shock to market values of firm-provided positions and risk factor sensitivities.28 27 28 The fair value of each AFS security is projected over the ninequarter projection horizon using either a present-value calculation, a full revaluation using a security-specific discounted cash flow model, or a duration-based approach, depending on the asset class. The trading model is also used to calculate gains or losses on firms’ portfolios of hedges on credit valuation adjustment exposures (CVA hedges). Incremental Default Risk The Federal Reserve separately estimates the risk of losses arising from a jump-to-default of issuers of debt securities in the trading book, in excess of mark-to-market losses calculated by the trading model. Trading losses associated with IDR account for concentration risk in agencies, trading book securitization positions, and corporate, sovereign, and municipal bonds. These losses are applied in each of the nine quarters of the projection horizon. Largest Counterparty Default Losses The LCPD scenario component is applied to firms with substantial trading or custodial operations. The LCPD captures the risk of losses due to an unexpected default of the counterparty whose default on all derivatives and SFTs would generate the largest stressed losses for a firm. Consistent with the Federal Reserve’s modeling principles, losses associated with the LCPD component are recognized in the first quarter of the projection horizon. Balance Projections and the Calculation of Regulatory Capital Ratios Balance Sheet Items and Risk-Weighted Assets The Federal Reserve generally projects that a firm takes actions to maintain its current level of assets, including its securities, trading assets, and loans, over the projection horizon. The Federal Reserve assumes that a firm’s risk-weighted assets (RWAs) and leverage ratio denominators remain unchanged over the projection horizon except for changes primarily related to items subject to deduction from regulatory capital or due to changes to the Board’s regulations.29 Calculation of Regulatory Capital Ratios The five regulatory capital measures that are included in the supervisory stress test are the (1) CET1, (2) tier 1 risk-based capital, (3) total risk-based capital, (4) tier 1 leverage, and (5) supplementary leverage ratios (see table 2). A firm’s regulatory capital ratios are calculated in accordance with the Board’s regulatory capital rules using Federal Reserve projections of pre-tax net income and other scenario- 29 See 12 C.F.R. pt. 252, appendix B. 19 dependent components of the regulatory capital ratios.30 Pre-tax net income and the other scenario-dependent components of the regulatory capital ratios are combined with additional information, including assumptions about taxes and capital distributions, to calculate post-stress regulatory capital. In that calculation, the Federal Reserve first adjusts pre-tax net income to account for taxes and other components of net income, such as income attributable to minority interests, to arrive at after-tax net income.31 The Federal Reserve calculates the change in equity capital over the projection horizon by combining projected after-tax net income with changes in OCI, assumed capital distributions, and other components of equity capital. The path of regulatory capital over the projection horizon is calculated by combining the projected change in equity capital with the firm’s starting capital position and accounting for other adjustments to regulatory capital specified in the Board’s regulatory capital framework.32 The denominator of each firm’s regulatory capital ratios, other than the leverage ratios, is calculated using the standardized approach for calculating RWAs for each quarter of the projection horizon, in accordance with the transition arrangements in the Board’s capital rules.33 Capital Action Assumptions To project post-stress capital ratios for the December stress test, the Federal Reserve uses the same set of standardized capital action assumptions that are specified in the Dodd-Frank Act stress test rules. As previously noted, in March 2020, the Board 30 31 32 33 In April 2020, the Board temporarily excluded deposits at Federal Reserve Banks and holdings of U.S. Treasuries from the denominator of the supplementary leverage ratio (SLR). This temporary relief is scheduled to expire after the first quarter of 2021, and the Federal Reserve has adjusted its supervisory capital calculation to reflect this change in the firms’ projected SLR. 85 Fed. Reg. 20578 (Apr. 14, 2020). The Federal Reserve applies a consistent tax rate of 21 percent to pre-tax net income and accounts for deferred tax assets. The tax calculations do not include the effect of the temporary provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act to allow for tax carrybacks, which will expire at the end of the 2020 tax year. The regulatory capital framework specifies that regulatory capital ratios account for items subject to adjustment or deduction in regulatory capital, limits the recognition of certain assets that are less loss-absorbing, and imposes other restrictions. 12 C.F.R. pt. 217, subpt. G. amended the capital action assumptions in its stress testing requirements.34 According to these amended requirements, common stock dividend payments are assumed to be zero over the projection horizon. Scheduled dividend, interest, or principal payments that qualify as additional tier 1 capital or tier 2 capital are assumed to be paid, and repurchases of such capital instruments are assumed to be zero. The capital action assumptions do not include issuances of new common stock or preferred stock. The projection of post-stress capital ratios does not include capital actions or other changes in the balance sheet associated with any business plan changes. Data Inputs Most of the data used in the Federal Reserve’s stress test projections are collected through the Capital Assessments and Stress Testing (FR Y-14A/Q/M) information collection, which includes a set of annual, quarterly, or monthly schedules.35 These reports collect detailed data on PPNR, loans, securities, trading and counterparty risk, losses related to operational-risk events, and business plan changes. Each of the 33 firms participating in the December stress test submitted FR Y-14A, FR Y-14Q, and FR Y-14M data as of June 30, 2020. The FR Y-14Q and FR Y-14M data were submitted according to the timeline indicated in the instructions. Certain firms were also required to submit stressed counterparty data on the FR Y-14Q by November 2, 2020. The FR Y-14A reports, which include projected data, were also submitted by November 2, 2020. Consistent with the Board’s Stress Testing Policy Statement, the Federal Reserve makes certain assumptions about missing data or data with deficiencies significant enough to preclude the use of supervisory models.36 Given a reasonable set of assumptions or approaches, all else equal, the Federal Reserve will opt to use those that result in larger losses or lower revenue. The conservative assumptions applied depend on the nature of the data deficiency.37 Where possible and 34 35 36 37 85 Fed. Reg. 15576 (Mar. 18, 2020). The FR Y-14 report forms are available on the Federal Reserve website at https://www.federalreserve.gov/apps/reportforms/default.aspx. 12 C.F.R. pt. 252, appendix B. The Federal Reserve has established conservative approaches for missing or insufficient data for its core PPNR, operationalrisk loss, retail loan loss, wholesale loan loss, securities loss, fair-value loan loss, and CVA models. The methodology that 20 December 2020 Stress Test Results Box 2. Model Adjustments The uncertainty associated with the COVID event, the path of the economy, and the government responses presents challenges for risk measurement and projections, including for the types of models used in the stress tests by both firms and the Federal Reserve. To address these challenges, the Federal Reserve made three targeted adjustments for the December stress test.1 These adjustments are intended to maintain appropriate sensitivity to stress conditions and to ensure data consistency across firms. They affect the PD for corporate and certain consumer loans,2 the LGD for income-producing CRE loans backed by hotel properties, and the calculation of the payment status for first-lien mortgages in forbearance. Following the Federal Reserve’s policies related to model risk management, these adjustments were reviewed by an independent validation group.3 1 2 3 The sensitivity analysis outlined a series of targeted adjustments to capture material changes in the banking environment arising from the COVID event. Those targeted adjustments were specific to the sensitivity analysis to reflect the rapidly changing conditions at the time. These include the models for C&I loans, small-business loans, business and corporate credit card loans, student loans, and additional categories of consumer lending as defined in the FR Y-9C, Schedule HC-C, items 6.b and 6.d. Each year, an independent System Model Validation group validates the supervisory stress test models. This group’s model validation process includes reviews of model performance, conceptual soundness, and the processes, procedures, and controls used in model development, implementation, and the production of results. See https://www.federalreserve.gov/publications/files/ 2020-march-supervisory-stress-test-methodology.pdf. Box 2. Mode Corporate and Certain Consumer Loans The COVID event has caused unprecedented changes in macroeconomic and financial variables. At the same time, credit risk measures have not risen appreciably from pre–COVID event levels, due to government responses to support households and businesses, as well as loss mitigation programs initiated by firms. As a result, relationships between macroeconomic variables and credit risk measures are outside their range of historical experience. However, these unusual conditions may be temporary, particularly in the absence of further fiscal actions or loss mitigation programs. Due to these unusual circumstances, loss projections without a model adjustment would not capture the elevated risk associated with the COVID event. The Federal Reserve adjusted the second quarter of 2020 values of the unemployment rate and other relevant macroeconomic inputs to the corporate and certain consumer loan models by averaging over previous quarters. This adjustment better aligns the macroeconomic and financial variables with credit risk measures and results in higher loss projections than if the models were run without the adjustment. the Federal Reserve uses to implement these assumptions may vary somewhat across supervisory models. First-Lien Mortg The COVID even some borrowers tion programs, im government and make payments. all consumer loa age of loan balan material for firstthere are materia reported loss mit Commercial Real Estate Demand for hotels declined substantially due to travel restrictions and lockdowns, leading to an unprecedented increase in hotel vacancy rates.4 The 4 As noted in the October 2020 Beige Book, “the travel and tourism industry saw modest improvement, but remained weak.” See (continued on next page) appropriate, conservative values are assigned to specific deficient data items reported in the FR Y-14A/Q/M information collection. For example, if certain observations in the first-lien mortgage portfolio were missing credit scores, the Federal Reserve would apply to those observations the 10th percentile credit score across all FR Y-14M submissions for that portfolio. Federal Reserve’ loans collateraliz with extraordinar ence losses that recovery rates th In some cases, t the value of repu some other use. bound on the rec reflects this value loss projections t adjustment. In other cases in which the data deficiency is severe enough that a modeled estimate cannot be produced for a portfolio segment or portfolio, the Federal Reserve may assign a conservative rate (e.g., the 10th percentile PPNR rate or the 90th percentile loss rate) to that segment or portfolio. In general, conservative portfolio loss rates are calculated at the most granular definition of a portfolio possible. For example, home equity losses are composed of losses on HELOCs and HELs. If a given firm reported “The Beige Book – .federalreserve.gov 5 A survey by the U. approximately 13 p confidence that th payment. See Hou data/tables/2020/d Loans edented ncial variables. s have not risen vels, due to useholds and n programs initips between risk measures xperience. Howe temporary, fiscal actions or loss projections ot capture the VID event. The d quarter of 2020 d other relevant ate and certain over previous ns the macroh credit risk rojections than justment. ially due to ding to an ancy rates.4 The he travel and tourism ined weak.” See 21 Box 2. Model Adjustments—continued Federal Reserve’s stress test framework projects that loans collateralized by hotel properties in markets with extraordinarily high vacancy rates would experience losses that reflect significantly lower collateral recovery rates than have been historically observed. In some cases, these recovery rates may be below the value of repurposing the land and/or structure to some other use. The Federal Reserve set a lower bound on the recovery rate for such loans that reflects this value. This adjustment results in lower loss projections than if the model was run without the adjustment. First-Lien Mortgages The COVID event has severely affected the ability of some borrowers to repay their loans.5 Loan mitigation programs, implemented widely by the federal government and firms, assist borrowers struggling to make payments. While these programs affect nearly all consumer loans to varying degrees, the percentage of loan balances in forbearance is especially material for first-lien mortgages. At the same time, there are material differences in how individual firms reported loss mitigation data on regulatory reports. “The Beige Book – October 2020,” available at https://www .federalreserve.gov/monetarypolicy/files/BeigeBook_20201021.pdf. 5 A survey by the U.S. Census Bureau in November estimated that approximately 13 percent of mortgage borrowers had little to no confidence that they could complete their December mortgage payment. See Household Pulse Survey, https://www.census.gov/ data/tables/2020/demo/hhp/hhp19.html. The Federal Reserve adjusted the calculation of payment status for first-lien mortgages in forbearance in order to standardize reporting practices across firms, by using FR Y-14 data items that were reported consistently across firms. This adjustment results in higher loss projections than if the model was run without the adjustment. Government Support Programs Consistent with previous stress tests, the model adjustments in the December stress test do not directly account for an increase in government support programs. These programs—including expanded eligibility for unemployment insurance, larger unemployment insurance payments, and federal loan guarantee programs, such as the Paycheck Protection Program (PPP)—support credit access and improve credit quality for households and businesses.6 However, many COVID event-related support programs for households and businesses have already or will expire in the coming months. Furthermore, the Federal Reserve’s stress test framework does not directly incorporate potential future policy actions, although some aspects may be indirectly taken into account during the design of the supervisory scenarios. 6 The Federal Reserve reflects the federal loan guarantee for PPP loans in its stress test. The Federal Reserve’s stress test assumes that PPP loans earn interest income but incur no credit losses. In addition, PPP loans are assigned a risk weight of zero, consistent with the regulatory capital rule. ed on next page) deficient data for its HELOC portfolio only, then the overall home equity losses for that firm would be based on a conservative loss rate applied to the HELOC portfolio, but HEL projected losses would be modeled using the supervisory model. Firms are required to submit detailed loan and securities information for all material portfolios, where portfolios categories are defined in the FR Y-14M and FR Y-14Q instructions. The definition of a portfolio’s materiality varies and depends primarily on the firm’s complexity. Each firm has the option to either submit or not submit the relevant data schedule for a given portfolio that does not meet the materiality threshold. If the firm does not submit data on its immaterial portfolio(s), the Federal Reserve will assign the median loss rate estimated across the set of firms with material portfolios. 23 Supervisory Stress Test Results This section describes the Federal Reserve’s projections of losses, revenues, expenses, and capital positions for the 33 firms in the December stress test under the severely adverse and alternative severe scenarios. Results are presented both in the aggregate and for individual firms. The aggregate results reflect the sensitivities of losses, revenues, and capital at these firms as a group to the stressed economic and financial market conditions contained in those scenarios. The range of results across individual firms reflects differences in business focus, asset composition, revenue and expense sources, and portfolio risk characteristics. The comprehensive results for individual firms are reported in appendix B. Changes in supervisory stress test results across exercises reflect changes in • firm starting capital positions; • scenarios used for the supervisory stress test; • portfolio composition and risk characteristics; and • models used in the supervisory stress test. While the results under the two scenarios described here are approximately similar, there are differences designed to reflect a broad set of severe but plausible risks. Generally, the alternative severe scenario exhibits a smaller initial decrease in economic activity but a more sluggish recovery relative to the severely adverse scenario. The different scenario paths lead to slightly larger PPNR and trading revenue projections under the severely adverse scenario as equity asset values recover faster. Additionally, the faster recovery leads to lower loan losses and lower provision expenses over the full 13 quarters under the severely adverse scenario. In the aggregate, each of the five capital and leverage ratios declines similarly but subsequently rises more under the severely adverse scenario. Severely Adverse Scenario Under the supervisory severely adverse scenario, the aggregate CET1 ratio is projected to decline to a minimum of 9.6 percent before rising to 10.2 percent at the end of nine quarters (see table 3). In the aggregate, each of the five capital and leverage ratios declines over the course of the projection horizon from their second quarter of 2020 levels, with third quarter of 2022 levels ranging from 1.2 percentage points to 2.2 percentage points lower than at the start of the projection horizon (see table 3). The changes in post-stress capital ratios vary considerably across firms (see figure 11), and table 4 presents these ratios for each of the 33 firms. Differences in the declines in ratios across firms are primarily related to differences in the Federal Reserve’s projections of losses, revenues, and expenses. Projected Losses The Federal Reserve projects that the 33 firms as a group would experience significant losses on loans and other positions under the severely adverse scenario. In this scenario, losses are projected to be $629 billion for the 33 firms in the aggregate over the nine quarters of the projection horizon. These losses include • $514 billion in accrual loan portfolio losses; • $4 billion in securities losses;38 38 For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses, in accordance with FASB, Financial Instruments–Credit Losses (Topic 326), FASB ASU 2016-13 (Norwalk, Conn.: FASB, June 2016). Prior to the adoption of ASU 2016-13, securities credit losses were realized through other-than-temporary impairment (OTTI). 24 December 2020 Stress Test Results Figure 10. Projected losses in the severely adverse scenario Billions of dollars First-lien mortgages, domestic 26 Junior liens Trading and Other losses and HELOCs, counterparty 16 domestic losses 7 95 Securities losses 4 Commercial and industrial loans 121 Other loans 57 Other consumer loans 48 Commercial real estate, domestic 98 Credit cards 158 • $95 billion in trading and counterparty losses at the 13 firms with substantial trading, processing, or custodial operations; and • $16 billion in additional losses from items such as loans booked under the FVO (see table 3). Losses on accrual loan portfolios account for 82 percent of the projected losses for the 33 firms, while trading and counterparty losses account for 15 percent (see figure 10). Loan Losses Total loan losses are $514 billion for the 33 firms in the December stress test. For the same firms, total loan losses were $433 billion in the June stress test. Loan losses on consumer products (domestic residential mortgages, domestic junior liens and HELOCs, credit cards, and other consumer loans) represent a slightly smaller share of losses than losses on commercial products (domestic CRE, C&I loans, and other loans) (see table 3). Consumer and commercial products represent 38 and 44 percent of total projected losses, respectively. C&I loan losses and credit card losses are the two largest categories of loan losses at $121 billion and $158 billion, respectively. over the nine quarters of the projection horizon divided by average loan balances over the horizon. However, total loan loss rates vary significantly across firms, ranging between 1.7 percent and 21.3 percent across these institutions (see table 8 and figure 12). Firms’ loan loss rates reflect differences in the portfolios held by each firm and the characteristics of the loans within each portfolio. Loan portfolio composition matters because projected loss rates vary significantly for different types of loans. In the aggregate, nine-quarter cumulative loss rates vary from 2.1 percent on domestic first-lien mortgages to 22.3 percent on credit cards, reflecting both differences in typical performance of these loans and differences in the sensitivity of different types of loans to the scenarios. In particular, lending categories for which performance is sensitive to credit spreads or unemployment rates may experience high stressed loss rates due to the considerable stress on these factors in the severely adverse and alternative severe scenarios.39 Projected loss rates on most loan categories show similar dispersion across firms (see table 8 and figures C.1 through C.7). There are significant differences across firms in the projected loan loss rates for similar types of loans. For example, while the median projected loss rate on C&I loans is 7.3 percent, the rates among firms with C&I loans vary from a low of 1.2 percent to a high of 27.0 percent. For credit card loans, the range of projected loss rates is from 13.3 percent to 35.8 percent, with a median of 23.7 percent. Differences in projected loss rates over time primarily reflect changes in loan and borrower characteristics and changes in the scenarios. The overall loan loss rate in the December stress test is higher than the June stress test due to the generally higher projected loss rates across portfolios, with larger increases for severely affected portfolios such as CRE. The increase in risk was offset somewhat by a shift in the composition of firms’ loan portfolios away from portfolios with higher loss rates. In particular, consumer credit card balances have declined significantly since the start of the year as a result of 39 The aggregate nine-quarter cumulative loss rate for all accrual loan portfolios is 7.7 percent, where the loss rate is calculated as total projected loan losses Additionally, losses are calculated based on the EAD, which includes both outstanding balances and any additional drawdown of the credit line that occurs prior to default, while loss rates are calculated as a percent of average outstanding balances over the projection horizon. 25 reduced consumer spending and higher loan repayment rates. Losses on Trading, Private Equity, SFT, and Derivatives Positions The severely adverse scenario results include $95 billion in trading and counterparty losses generated from the global market shock and LCPD components. For the 13 firms subject to one or both components, losses ranged from $0.9 billion to $23 billion (see table 6). The relative size of losses across firms depends on the specific risk characteristics of each firm’s trading positions, inclusive of hedges. Importantly, these projected losses are based on the trading positions and counterparty exposures held by these firms on the same as-of date (June 30, 2020) and could have differed if they had been based on a different date. Projected PPNR In the aggregate, the 33 firms are projected to generate $371 billion in PPNR cumulatively over the nine quarters of the projection horizon, equal to 2.0 percent of their combined average assets (see table 3). PPNR projections are driven by the shape of the yield curve, the path of asset prices, equity market volatility, and measures of economic activity in the severely adverse scenario. In addition, PPNR projections incorporate expenses stemming from estimates of elevated levels of losses from operational-risk events such as fraud, employee lawsuits, litigationrelated expenses, or computer system or other operating disruptions.40 In aggregate for the 33 firms, operational-risk losses are $160 billion for the December stress test. For the June stress test, operational-risk losses were $144 billion. Aggregate PPNR as a percent of combined average assets is lower under the severely adverse scenario in the December stress test than in the June stress test. Lower PPNR is partly due to lower net interest income, reflecting a sharper decrease in the term spread under the severely adverse scenario. There were also fairly sizable changes in firms’ balance sheets between December 2019 and June 2020. All else equal, larger balance sheets result in higher revenue that is roughly offset by higher expenses in the stress test projections. Noninterest income remained 40 These estimates are conditional on the severely adverse scenario and conservative assumptions. They are not a supervisory estimate of the firms’ current or expected legal liability. higher than in the June stress test, supported by stronger trading revenues and investment banking fees. Stronger noninterest income partly dampened the decrease in PPNR. The ratio of projected cumulative PPNR to average assets varies across firms (see figure 13). A significant portion of this variation reflects differences in business focus across the institutions. For instance, the ratio of PPNR to assets tends to be higher at firms focusing on credit card lending, reflecting the higher net interest income that credit cards generally produce relative to other forms of lending.41 Importantly, lower PPNR rates do not necessarily imply lower net income, because the same business focus and revenue risk characteristics determining differences in PPNR across firms could also result in offsetting differences in projected losses across firms. Net Income and Regulatory Capital Treatment Projected PPNR and provisions for loan losses are the primary determinants of projected pre-tax net income. The projected decline in pre-tax net income is 0.9 percent of average total assets, compared to a decline of 1.1 percent in the June stress test. Table 6 presents projections of the components of pre-tax net income, including provisions into the allowance and one-time income and expense and extraordinary items, under the severely adverse scenario for each of the 33 firms (see table 3 for aggregate). The projections are cumulative for the nine quarters of the projection horizon. The Federal Reserve’s projections of pre-tax net income under the severely adverse scenario imply negative net income at most of the 33 firms individually and for the firms as a group over the ninequarter projection horizon. Projected pre-tax net income is an aggregate net loss of $173 billion over the projection horizon for the 33 firms. For the June stress test, projected pre-tax net income was a slightly larger loss of $177 billion even though CET1 declined less in June than in the December stress test. Further reducing CET1 are higher projected loan charge-offs combined with lower projected revenue over the projection horizon, which results in larger deferred tax assets. These assets are deducted from 41 As noted, credit card lending also tends to generate relatively high loss rates, so the higher PPNR rates at these firms do not necessarily indicate higher profitability. 26 December 2020 Stress Test Results CET1 because they are not considered available to absorb losses. projected provision expenses would increase by $100 billion. The pre-tax net income projections incorporate loan losses through provisions, which equal projected loan losses plus the amount needed for the allowance to be at an appropriate level at the end of each quarter. The $429 billion in total provisions includes $514 billion in net charge-offs, with the remainder being the reserve release. These amounts are cumulative over the projection horizon and do not fully reveal variation in the allowance during the course of the nine quarters. Specifically, the projected allowance increases during the early quarters of the projection horizon, given the increased economic stress in the severely adverse scenario, and then declines as the economic stress abates. The ratio of pre-tax net income to average assets for each of the 33 firms ranges from −3.3 percent to 3.3 percent (see figure 14). Projected cumulative pre– tax net income for most of the firms (29 of 33) is negative over the projection horizon. Differences across the firms reflect differences in the sensitivity of the various components of net income to the economic and financial market conditions in the supervisory scenarios. Additional variation in projected net income results from the effect of the global market shock and LCPD components that affect 13 of the 33 firms. While loan losses are higher for the December stress test than in the June stress test, the projected reserve release is due to the sharp increase in firms’ loan-loss reserves since the beginning of the year. As firms simultaneously responded to the economic contraction and the adoption of CECL, loan-loss reserves more than doubled in the first two quarters of 2020.42 Without the increase in loan-loss reserves, 42 For firms electing the CECL transition provision in 12 C.F.R. pt. 217, subpt. G, the starting capital position used to project the path of regulatory capital includes eligible transitional amounts intended to mitigate the adverse effect of differences between allowances under CECL and the incurred loss methodology. Projected capital levels do not incorporate changes in the transitional amounts during the transition period, which has a Firms that are required to include AOCI in regulatory capital and those that opt in to including it are also affected by OCI (see table 6). OCI is driven by unrealized gains and losses on AFS securities in the supervisory stress test. The severely adverse scenario features a lower initial level for the 10-year Treasury yield, leading to a relatively smaller decline in the yield in the first projection quarter and subsequently lower projected unrealized gains for AFS securities. The interest rate path and credit spreads assumed in the scenario result in $5.2 billion of OCI over the nine quarters of the projection horizon for firms required to include AOCI in regulatory capital and those that opt in to including it. duration of three or five years depending on the transition election. Table 2. Applicable capital ratios and calculations for firms in the December stress test Calculation, by aspect of ratio Capital ratio Capital in numerator Denominator Common equity tier 1 capital ratio Definition of regulatory capital Standardized approach risk-weighted assets Tier 1 capital ratio Definition of regulatory capital Standardized approach risk-weighted assets Total capital ratio Definition of regulatory capital Standardized approach risk-weighted assets Tier 1 leverage ratio Definition of regulatory capital Average assets Supplementary leverage ratio Definition of regulatory capital Average assets and off-balance sheet exposures 27 Table 3. 33 participating firms Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 12.2 13.8 16.4 7.9 7.4 Stressed capital ratios1 Ending Minimum 10.2 11.8 14.2 6.7 5.5 9.6 11.3 14.0 6.4 5.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 514.3 25.8 6.9 120.7 98.3 158.0 47.6 56.8 7.7 2.1 3.1 7.5 12.6 22.3 6.4 4.0 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and Paycheck Protection Program (PPP) loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 10,370.5 10,275.1 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 371.0 2.0 741.9 889.6 4.0 4.8 1,260.5 0.0 6.8 429.1 3.6 95.1 15.7 -172.6 -0.9 5.2 Actual 2020:Q2 -37.2 2022:Q3 -32.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 28 December 2020 Stress Test Results Table 4. Projected minimum common equity tier 1 capital ratio under the severely adverse scenario, 2020:Q3–2022:Q3 33 participating firms Percent Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company Stressed ratios with Dodd-Frank Act stress testing capital action assumptions 7.4 13.5 9.3 11.9 14.7 7.0 11.5 7.1 9.6 6.3 16.9 19.8 8.3 7.5 8.5 5.5 8.0 10.0 7.7 5.0 12.4 10.9 12.6 9.6 12.6 7.1 14.4 11.4 15.4 7.8 16.7 7.6 8.3 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratio presented is for the period 2020:Q3 to 2022:Q3. Source: Federal Reserve estimates in the severely adverse scenario. 29 Table 5.A. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the severely adverse scenario: Risk-based Category I, II, and III firms Percent Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Supplementary leverage ratio1 Tier 1 leverage ratio Firm Actual Ending 2020:Q2 Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC Capital One Financial Corporation Citigroup Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. JPMorgan Chase & Co. Morgan Stanley Northern Trust Corporation The PNC Financial Services Group, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company Minimum Actual Ending 2020:Q2 Minimum Actual Ending 2020:Q2 Minimum Actual Ending 2020:Q2 Minimum Actual Ending 2020:Q2 Minimum 11.6 9.5 9.3 13.2 11.1 10.9 15.8 13.5 13.5 7.4 6.2 6.1 7.1 5.3 5.2 12.7 17.3 14.6 15.5 11.9 14.7 15.6 20.4 17.4 18.7 14.8 18.0 16.6 23.4 18.4 21.9 15.9 21.3 6.2 9.5 7.0 8.7 5.9 8.2 8.2 9.1 8.3 7.6 7.1 7.2 12.4 11.8 7.2 10.9 7.1 9.6 14.2 13.3 8.9 12.5 8.9 11.1 16.7 16.5 11.5 15.5 11.4 14.5 10.3 7.1 6.6 6.6 6.6 5.8 9.7 6.7 5.5 5.3 5.5 4.7 21.4 31.5 17.8 19.8 16.9 19.8 22.0 44.7 18.5 34.3 17.6 34.3 22.1 44.8 18.5 34.6 17.8 34.6 14.0 10.4 11.2 7.3 10.6 7.3 12.6 12.0 10.1 6.6 9.5 6.6 13.3 9.8 8.5 15.2 11.8 10.5 18.1 14.6 13.6 7.6 5.8 5.1 6.6 4.4 3.8 13.6 12.4 16.5 13.4 5.5 10.8 13.1 13.2 5.5 10.0 12.4 12.6 15.4 14.3 18.6 14.6 7.3 12.7 15.2 14.3 7.3 11.9 14.5 13.8 19.9 16.7 21.0 16.5 11.8 14.8 17.7 16.5 11.8 14.4 17.1 16.3 6.9 6.9 8.1 7.6 3.2 6.1 6.5 7.5 3.2 5.7 6.2 7.2 6.4 6.8 7.3 9.0 2.5 5.0 5.1 8.6 2.5 4.7 4.9 8.3 11.3 12.3 16.3 9.7 21.0 9.0 11.0 9.8 13.3 16.0 7.9 17.8 8.0 8.7 9.6 11.4 15.4 7.8 16.7 7.6 8.3 12.4 14.6 16.3 11.6 25.8 10.6 12.6 11.0 15.6 16.0 9.8 23.1 9.6 10.4 10.8 13.7 15.4 9.7 22.1 9.2 9.9 14.9 15.7 17.5 14.0 27.0 12.8 15.9 13.0 16.8 16.8 12.5 24.8 11.5 13.4 13.0 14.9 16.7 12.5 23.6 11.4 13.3 9.4 6.1 8.5 9.0 11.3 8.0 8.0 8.3 6.5 8.4 7.7 9.2 7.2 6.5 8.1 5.7 8.1 7.6 8.7 6.9 6.2 9.3 8.3 9.4 8.5 11.2 7.1 7.5 7.1 8.2 7.5 6.7 7.8 5.8 5.3 6.9 7.2 7.2 6.6 7.4 5.6 5.1 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. 1 Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Source: Federal Reserve estimates in the severely adverse scenario. 30 December 2020 Stress Test Results Table 5.B. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the severely adverse scenario: Risk-based Category IV firms Percent Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Firm Ally Financial Inc. American Express Company BMO Financial Corp. BNP Paribas USA, Inc. Citizens Financial Group, Inc. Discover Financial Services Fifth Third Bancorp Huntington Bancshares Incorporated KeyCorp M&T Bank Corporation MUFG Americas Holdings Corporation RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. Actual 2020:Q2 Ending Minimum Actual 2020:Q2 Ending Minimum Actual 2020:Q2 Ending Minimum Actual 2020:Q2 Ending Minimum 10.1 13.6 12.1 15.8 9.6 11.7 9.7 7.4 17.0 7.0 11.5 6.3 9.0 7.6 7.4 13.5 7.0 11.5 6.3 8.3 7.5 11.9 14.8 12.6 15.8 10.9 12.9 11.0 9.1 18.2 7.5 11.5 7.7 10.2 8.9 9.1 14.8 7.5 11.5 7.7 9.4 8.8 13.8 16.5 15.1 18.2 13.1 14.7 14.2 11.1 19.8 10.0 13.8 9.9 12.0 12.1 11.1 16.5 10.0 13.8 9.9 11.4 12.1 8.9 10.4 8.5 8.6 9.3 10.0 8.2 6.9 13.1 5.0 6.2 6.5 8.1 6.6 6.9 10.4 5.0 6.2 6.5 7.3 6.5 9.8 9.1 9.5 8.2 8.0 5.0 8.0 7.7 5.0 11.8 10.5 10.7 10.1 9.4 6.2 10.0 9.1 6.2 13.8 12.8 13.0 11.9 11.3 8.5 11.9 11.3 8.5 8.9 8.8 8.6 7.6 7.9 4.9 7.5 7.7 4.9 14.5 16.1 8.9 14.3 10.9 12.7 7.2 15.5 10.9 12.6 7.1 14.4 14.5 16.1 10.4 15.7 10.9 12.7 8.7 16.9 10.9 12.6 8.6 15.8 15.6 16.8 12.6 17.1 12.0 13.8 10.8 18.3 12.0 13.8 10.8 17.3 8.9 9.9 8.4 12.4 6.7 7.7 7.1 13.5 6.7 7.6 7.0 12.3 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Source: Federal Reserve estimates in the severely adverse scenario. Table 5.C. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the severely adverse scenario: 33 participating firms Percent Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Supplementary leverage ratio1 Tier 1 leverage ratio Firm Actual Ending 2020:Q2 33 participating firms 12.2 10.2 Minimum 9.6 Actual Ending 2020:Q2 13.8 11.8 Minimum 11.3 Actual Ending 2020:Q2 16.4 14.2 Minimum 14.0 Actual Ending 2020:Q2 7.9 6.7 Minimum 6.4 Actual Ending 2020:Q2 7.4 5.5 Minimum 5.2 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. 1 Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Source: Federal Reserve estimates in the severely adverse scenario. 31 Figure 11. Change from 2020:Q2 to minimum CET1 ratio in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=2.6% -2 0 2 4 6 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of risk-weighted assets. 8 10 12 32 December 2020 Stress Test Results Figure 12. Total loan loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=6.9% 0 4 8 12 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average loan balances. 16 20 33 Table 6. Projected losses, revenue, and net income before taxes through 2022:Q3 under the severely adverse scenario: 33 participating firms Billions of dollars Sum of revenues Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company 33 participating firms Pre-provision net revenue1 Other revenue2 3.7 18.8 34.4 7.6 4.7 0.8 1.1 23.1 49.4 3.7 1.1 -0.7 13.6 5.7 17.4 -0.4 3.1 59.9 4.0 4.3 6.1 1.4 2.0 9.3 1.9 3.6 7.2 3.9 9.7 12.2 2.5 16.7 39.4 371.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Equals Memo items Other effects on capital Other losses/ gains5 Net income before taxes Other comprehensive income6 AOCI included in capital (2022:Q3) 0.0 0.0 1.6 0.0 0.0 0.0 0.0 0.1 1.2 0.0 0.2 0.0 0.0 0.0 3.8 0.0 0.0 2.5 0.1 0.0 3.3 0.1 0.0 0.4 0.0 0.0 0.4 0.0 0.0 0.2 0.1 0.0 1.6 15.7 -3.6 6.2 -30.5 4.4 -0.6 -5.8 -3.9 -12.8 -2.7 -4.6 -1.8 -2.5 -1.5 -2.6 -18.8 -8.8 -1.1 -18.8 -1.0 -4.6 -14.9 -3.8 -0.3 -3.8 -2.6 -1.4 2.3 1.3 -0.2 -5.5 -0.1 -3.1 -25.2 -172.6 0.0 0.0 1.8 -0.1 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.2 0.0 0.0 0.7 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 5.2 0.0 -2.9 0.3 -2.0 0.0 0.0 0.0 -0.1 -34.4 0.0 0.0 -0.2 0.0 0.0 -0.4 0.1 0.0 5.9 0.0 0.0 0.7 0.0 0.6 0.0 0.0 0.0 0.0 -0.6 0.0 0.0 0.0 -0.1 1.2 -32.0 Minus sum of provisions and losses Credit losses Provisions for Trading and on investment loan and lease counterparty securities losses losses4 (AFS/HTM)3 7.0 12.6 51.8 1.6 4.3 6.6 5.0 35.8 40.0 8.2 0.2 0.9 15.1 8.2 11.8 7.2 4.1 52.1 5.0 8.9 7.6 5.1 2.2 12.6 4.2 5.0 4.5 1.5 9.7 17.3 1.3 19.8 52.0 429.1 0.3 0.0 0.1 0.2 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.8 0.0 0.0 0.1 0.1 0.1 0.1 0.2 0.0 0.0 0.1 0.2 0.1 0.0 0.0 0.6 3.6 0.0 0.0 11.3 1.4 1.0 0.0 0.0 0.0 10.3 0.0 2.6 0.9 0.0 0.0 20.6 1.2 0.0 23.2 0.0 0.0 10.1 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 1.2 0.0 10.4 95.1 Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding. 1 Pre-provision net revenue includes losses from operational-risk events and other real estate owned costs. 2 Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. 3 For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. 4 Trading and counterparty losses include mark-to-market and credit valuation adjustments losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. 5 Other losses/gains includes projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. 6 Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. Source: Federal Reserve estimates in the severely adverse scenario. 34 December 2020 Stress Test Results Table 7. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the severely adverse scenario: 33 participating firms Billions of dollars Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company 33 participating firms Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial1 Commercial real estate, domestic Credit cards Other consumer2 Other loans3 8.1 15.4 60.2 1.6 5.0 6.5 5.0 42.6 55.9 8.6 0.2 0.9 18.9 9.3 13.5 7.4 5.0 70.1 5.8 9.2 7.2 5.4 2.0 15.8 3.9 6.0 9.0 1.3 11.2 19.2 1.1 23.1 59.9 514.3 0.2 0.0 4.7 0.1 0.0 0.2 0.2 0.0 1.9 0.5 0.0 0.1 0.0 0.4 0.0 0.5 0.5 4.3 0.3 0.5 0.5 0.9 0.1 0.5 0.5 0.5 0.2 0.0 0.6 1.0 0.4 1.3 4.9 25.8 0.0 0.0 0.9 0.0 0.0 0.1 0.1 0.0 0.8 0.5 0.0 0.0 0.1 0.2 0.0 0.1 0.2 0.6 0.3 0.2 0.0 0.1 0.0 0.3 0.0 0.2 0.2 0.0 0.3 0.4 0.0 0.6 0.7 6.9 2.4 5.3 16.7 0.1 0.0 3.0 1.5 4.7 10.3 2.4 0.0 0.0 0.0 3.5 4.7 2.0 1.5 18.6 2.2 1.3 1.2 1.7 0.3 6.7 0.9 2.0 0.8 0.3 2.3 4.4 0.1 6.7 13.1 120.7 0.3 0.0 12.5 0.4 0.0 1.7 1.7 2.1 2.8 2.7 0.1 0.7 0.0 3.3 3.3 3.7 1.6 5.0 1.8 6.0 2.3 1.5 0.4 4.8 1.6 1.8 1.1 0.1 2.4 7.0 0.0 6.6 19.1 98.3 0.0 9.7 17.6 0.0 4.8 0.1 0.1 27.5 30.6 0.4 0.0 0.0 17.1 0.6 0.6 0.4 0.1 28.3 0.2 0.1 0.0 0.1 0.0 1.5 0.0 0.2 0.1 0.0 3.8 0.7 0.0 5.0 8.2 158.0 5.0 0.3 1.6 0.4 0.1 0.3 1.1 7.2 2.4 1.7 0.0 0.0 1.6 0.8 0.9 0.0 0.8 2.3 0.5 0.8 0.2 0.6 0.0 1.0 0.2 0.7 6.4 0.0 0.9 3.9 0.2 1.7 3.9 47.6 0.2 0.0 6.2 0.6 0.1 1.2 0.4 1.1 7.2 0.4 0.1 0.1 0.0 0.4 4.1 0.6 0.2 11.0 0.5 0.3 3.0 0.5 1.2 1.2 0.7 0.5 0.2 0.9 0.9 1.7 0.3 1.3 10.0 56.8 Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding. 1 Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. 2 Other consumer loans include student loans and automobile loans. 3 Other loans include international real estate loans. Source: Federal Reserve estimates in the severely adverse scenario. 35 Table 8. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the severely adverse scenario: 33 participating firms Percent of average loan balances1 Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company 33 participating firms Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 6.9 13.8 6.1 3.0 13.8 7.6 7.6 17.0 8.2 7.0 1.7 7.0 21.3 8.4 10.1 10.6 6.8 7.3 5.9 10.1 4.4 6.4 5.9 6.5 6.8 6.9 10.0 4.9 6.6 6.3 2.0 7.6 6.5 7.7 1.4 0.0 2.0 1.3 0.0 1.9 2.3 2.5 2.3 2.3 0.0 2.5 2.5 2.7 2.5 3.0 3.8 2.1 2.9 3.4 1.7 2.9 1.2 1.5 3.1 2.7 2.9 0.0 2.1 2.0 2.0 1.9 1.8 2.1 3.8 0.0 2.4 7.5 0.0 3.7 3.4 6.9 7.4 4.2 0.0 6.0 9.9 3.8 4.0 8.1 3.1 2.2 3.9 3.6 4.0 3.6 7.9 1.9 3.5 4.3 3.8 0.0 4.0 2.7 0.0 4.0 2.0 3.1 8.2 14.7 5.8 2.9 22.8 8.0 10.3 13.0 5.7 6.3 0.0 1.2 27.0 7.7 12.6 6.7 7.2 10.3 5.9 7.3 8.4 10.2 6.3 7.1 11.0 7.8 5.1 6.6 6.5 6.1 2.4 7.5 7.2 7.5 5.7 0.0 16.4 9.2 12.6 15.1 11.1 6.6 11.7 15.5 52.2 16.5 22.3 20.9 44.8 33.1 16.4 4.2 11.6 16.3 18.3 8.1 8.7 13.3 11.3 12.9 7.2 6.1 8.2 11.8 2.0 17.3 14.9 12.6 0.0 13.3 20.9 0.0 22.4 21.2 23.7 27.7 21.4 25.1 0.0 0.0 24.4 29.3 23.7 35.8 23.7 22.3 23.7 23.7 0.0 23.7 0.0 26.2 23.7 19.3 23.7 0.0 30.1 19.0 23.7 23.7 22.8 22.3 7.7 16.7 2.1 12.1 16.7 4.8 7.6 11.4 8.2 6.4 16.7 8.0 9.6 5.1 11.1 11.2 4.8 3.8 5.0 7.4 0.9 17.0 16.7 4.0 13.8 12.9 16.8 0.6 3.4 7.1 0.9 3.9 5.4 6.4 14.1 5.6 3.3 1.7 0.7 6.0 3.5 5.4 3.3 6.2 0.6 2.5 5.5 4.3 5.3 7.3 3.8 4.7 2.9 5.0 3.6 4.4 6.4 3.1 3.7 3.0 2.5 4.5 3.1 3.7 6.9 4.6 5.0 4.0 Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding. 1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 2 Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. 3 Other consumer loans include student loans and automobile loans. 4 Other loans include international real estate loans. Source: Federal Reserve estimates in the severely adverse scenario. 36 December 2020 Stress Test Results Figure 13. PPNR rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=2.0% -2 0 2 4 6 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets. 8 10 12 37 Figure 14. Pre-tax net income rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=-1.2% -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets. 1.0 1.5 2.0 2.5 3.0 3.5 38 December 2020 Stress Test Results Alternative Severe Scenario The projected maximum declines in post-stress capital ratios in the alternative severe scenario are approximately similar to those under the severely adverse scenario. In the aggregate, each of the five capital and leverage ratios declines to a similar minimum as the severely adverse scenario, but the ratios rise less over the remaining projection horizon, reaching a lower ending value than the severely adverse scenario. The levels at the end of the projection horizon in the third quarter of 2022 range from 1.4 percentage points to 2.3 percentage points lower than at the start of the projection horizon (see table 9) for the five capital and leverage ratios. The changes in post-stress capital ratios vary considerably across the 33 firms (see figure 16 and table 10). Generally, the slightly lower ending capital and leverage ratios reflect the sluggish recovery and relatively higher persistence of stress in the alternative severe scenario compared to the severely adverse. The alternative severe scenario features a less-severe initial drop in global economic activity relative to the severely adverse scenario but a more sluggish and severe subsequent recovery. Unemployment, volatility, and corporate spreads stay elevated for a longer period of time, while the term spread recovers slightly faster. the FVO as spreads stay elevated for a longer period of time. The alternative severe projections imply lower aggregate pre-tax net income, which slightly reduces post-stress ending capital ratios. Projected Losses The Federal Reserve projects that the 33 firms as a group would experience significant losses on loans and other positions under the alternative severe scenario. In this scenario, losses are projected to be $612 billion for the 33 firms in the aggregate over the nine quarters of the projection horizon. These losses include • $491 billion in accrual loan portfolio losses; • $4 billion in securities losses;44 • $95 billion in trading and counterparty losses at the 13 firms with substantial trading, processing, or custodial operations; and • $22 billion in additional losses from items such as loans booked under the FVO (see table 9). Losses on accrual loan portfolios account for 80 percent of the projected losses for the 33 firms, while trading and counterparty losses account for 16 percent (see figure 15). Loan Losses PPNR is slightly lower compared to the severely adverse scenario due to lower trading revenue from the slower recovery in equity asset values. This lower revenue is only partially offset by higher interest income as a result of wider net interest margins compared to the severely adverse scenario. While larger balance sheets result in higher revenue projections, the increased revenue is roughly offset by higher expenses in the stress test projections. Losses over the full 13-quarter projection horizon are higher in the alternative severe scenario, leading to higher projected loan loss provisions.43 Loss rates in the first nine quarters are lower in the alternative severe scenario, as the sluggish recovery pushes losses further out into the projection horizon than in the severely adverse scenario. Other losses and gains are slightly higher in the alternative severe scenario, reflecting the larger markdowns for loans held under 43 The Federal Reserve assumes that the allowance at the end of each quarter covers projected loan losses for four quarters into the future. The allowance at the end of the ninth quarter equals projected loan losses from quarters 10 through 13. Total loan losses are $491 billion for the 33 firms (see table 9). For the June stress test, total loan losses were $433 billion for the same firms. Consumer and commercial products represent 36 and 44 percent of total projected losses, respectively. C&I loan losses and credit card losses are the two largest categories of loan losses at $121 billion and $144 billion, respectively. For the full group of 33 firms, the nine-quarter cumulative loss rate for all accrual loan portfolios is 7.3 percent, where the loss rate is calculated as total projected loan losses over the nine quarters of the projection horizon divided by average loan balances over the horizon. However, total loan loss rates vary significantly across firms, ranging between 1.6 per44 For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses, in accordance with FASB, Financial Instruments–Credit Losses (Topic 326), FASB ASU 2016-13 (Norwalk, Conn.: FASB, June 2016). Prior to the adoption of ASU 2016-13, securities credit losses were realized through OTTI. 39 Figure 15. Projected losses in the alternative severe scenario Billions of dollars Trading and counterparty losses 95 First-lien mortgages, domestic 24 Junior liens Other losses and HELOCs, 22 domestic 7 Securities losses 4 Net Income and Regulatory Capital Treatment Commercial and industrial loans 121 Other loans 58 Commercial real estate, domestic 92 Other consumer loans 45 Credit cards 144 cent and 19.5 percent across these institutions (see table 14 and figure 17). Losses on Trading, Private Equity, SFT, and Derivatives Positions The global market shock and LCPD components in the alternative severe scenario are the same as those reported in the severely adverse scenario. Projected PPNR In the aggregate, the 33 firms are projected to generate $363 billion in PPNR cumulatively over the nine quarters of the projection horizon, equal to 2.0 percent of their combined average assets (see table 9). The Federal Reserve’s PPNR projections are driven by the shape of the yield curve, the path of asset prices, equity market volatility, and measures of economic activity in the alternative severe scenario. In addition, the PPNR projections incorporate expenses stemming from estimates of elevated levels of losses from operational-risk events such as fraud, employee lawsuits, litigation-related expenses, or computer system or other operating disruptions.45 45 In aggregate for the 33 firms, operational-risk losses are $162 billion for the December stress test. For the June stress test, operational-risk losses were $144 billion. These estimates are conditional on the alternative severe scenario and on conservative assumptions. They are not a supervisory estimate of the firms’ current or expected legal liability. Projected PPNR and losses are the primary determinants of projected pre-tax net income. The projected decline in pre-tax net income is 1.1 percent of average total assets, which is the same as the decline of 1.1 percent in the June stress test. Table 12 presents projections of the components of pre-tax net income, including provisions into the allowance and one-time income and expense and extraordinary items, under the alternative severe scenario for each of the 33 firms (see table 9 for aggregate). The projections are cumulative for the nine quarters of the projection horizon. The Federal Reserve’s projections of pre-tax net income under the alternative severe scenario imply negative net income at most of the 33 firms individually and for the firms as a group over the ninequarter projection horizon. Projected pre-tax net income is an aggregate net loss of $198 billion over the projection horizon for the 33 firms. The projected pre–tax net income incorporates $440 billion in total provisions. The ratio of pre-tax net income to average assets for each of the 33 firms ranges from −3.5 percent to 3.5 percent (see figure 19). Projected cumulative pre– tax net income for most of the firms is negative over the projection horizon. Firms that are required to include AOCI in regulatory capital and those that opt in to including it are also affected by OCI (see table 12). OCI is driven by unrealized gains and losses on AFS securities in the supervisory stress test. The interest rate path and credit spreads assumed in the alternative severe scenario result in a loss of $3.1 billion of OCI over the nine quarters of the projection horizon for firms required to include AOCI in regulatory capital and those that opt in to including it. 40 December 2020 Stress Test Results Table 9. 33 participating firms Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 12.2 13.8 16.4 7.9 7.4 Stressed capital ratios1 Ending Minimum 9.9 11.5 14.1 6.5 5.3 9.7 11.4 14.1 6.4 5.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 491.2 24.4 6.6 121.4 92.4 144.1 44.6 57.7 7.3 2.0 3.0 7.6 11.9 20.3 6.0 4.1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 10,370.5 10,271.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 363.2 2.0 747.5 878.8 4.0 4.7 1,263.2 0.0 6.8 440.1 3.7 95.1 22.4 -198.2 -1.1 -3.1 Actual 2020:Q2 -37.2 2022:Q3 -40.4 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 41 Table 10. Projected minimum common equity tier 1 capital ratio under the alternative severe scenario, 2020:Q3–2022:Q3 33 participating firms Percent Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company Stressed ratios with Dodd-Frank Act stress testing capital action assumptions 7.3 13.7 9.2 12.2 15.2 6.5 11.1 7.4 9.8 6.2 17.1 19.5 9.6 7.5 8.3 5.1 8.1 10.0 7.7 4.8 11.9 10.7 12.6 9.6 12.4 7.0 14.8 11.5 15.6 7.7 16.7 7.8 8.3 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratio presented is for the period 2020:Q3 to 2022:Q3. Source: Federal Reserve estimates in the alternative severe scenario. 42 December 2020 Stress Test Results Table 11.A. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the alternative severe scenario: Risk-based Category I, II, and III firms Percent Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Supplementary leverage ratio1 Tier 1 leverage ratio Firm Actual Ending 2020:Q2 Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC Capital One Financial Corporation Citigroup Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. JPMorgan Chase & Co. Morgan Stanley Northern Trust Corporation The PNC Financial Services Group, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company Minimum Actual Ending 2020:Q2 Minimum Actual Ending 2020:Q2 Minimum Actual Ending 2020:Q2 Minimum Actual Ending 2020:Q2 Minimum 11.6 9.2 9.2 13.2 10.8 10.8 15.8 13.4 13.4 7.4 6.0 6.0 7.1 5.2 5.2 12.7 17.3 14.1 15.7 12.2 15.2 15.6 20.4 16.9 18.9 15.1 18.4 16.6 23.4 18.0 22.2 16.2 21.7 6.2 9.5 6.8 8.7 6.0 8.5 8.2 9.1 8.0 7.7 7.2 7.5 12.4 11.8 7.4 10.6 7.4 9.8 14.2 13.3 9.2 12.2 9.2 11.4 16.7 16.5 11.8 15.5 11.8 14.8 10.3 7.1 6.8 6.5 6.8 6.0 9.7 6.7 5.7 5.2 5.7 4.8 21.4 31.5 17.7 19.5 17.1 19.5 22.0 44.7 18.3 34.0 17.7 34.0 22.1 44.8 18.4 34.5 17.8 34.5 14.0 10.4 11.1 7.3 10.7 7.3 12.6 12.0 10.0 6.6 9.6 6.6 13.3 9.2 8.3 15.2 11.2 10.3 18.1 14.1 13.5 7.6 5.5 5.1 6.6 4.1 3.8 13.6 12.4 16.5 13.4 5.1 10.3 12.3 12.8 5.1 10.0 11.9 12.6 15.4 14.3 18.6 14.6 7.0 12.3 14.4 13.9 7.0 11.9 14.1 13.8 19.9 16.7 21.0 16.5 11.8 14.7 17.0 16.3 11.8 14.4 16.8 16.3 6.9 6.9 8.1 7.6 3.0 5.9 6.2 7.3 3.0 5.7 6.0 7.3 6.4 6.8 7.3 9.0 2.4 4.8 4.9 8.3 2.4 4.7 4.7 8.2 11.3 12.3 16.3 9.7 21.0 9.0 11.0 9.6 12.9 16.0 7.7 17.6 7.9 8.4 9.6 11.5 15.6 7.7 16.7 7.8 8.3 12.4 14.6 16.3 11.6 25.8 10.6 12.6 10.8 15.2 16.0 9.6 22.9 9.5 10.0 10.8 13.8 15.6 9.6 22.1 9.4 9.9 14.9 15.7 17.5 14.0 27.0 12.8 15.9 13.2 16.4 17.1 12.5 24.8 11.7 13.4 13.2 15.1 16.8 12.5 23.6 11.6 13.3 9.4 6.1 8.5 9.0 11.3 8.0 8.0 8.2 6.3 8.4 7.5 9.1 7.2 6.3 8.1 5.8 8.2 7.5 8.7 7.1 6.2 9.3 8.3 9.4 8.5 11.2 7.1 7.5 6.9 8.0 7.5 6.6 7.8 5.8 5.2 6.9 7.3 7.3 6.6 7.5 5.7 5.1 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. 1 Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Source: Federal Reserve estimates in the alternative severe scenario. 43 Table 11.B. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the alternative severe scenario: Risk-based Category IV firms Percent Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Firm Ally Financial Inc. American Express Company BMO Financial Corp. BNP Paribas USA, Inc. Citizens Financial Group, Inc. Discover Financial Services Fifth Third Bancorp Huntington Bancshares Incorporated KeyCorp M&T Bank Corporation MUFG Americas Holdings Corporation RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. Actual 2020:Q2 Ending Minimum Actual 2020:Q2 Ending Minimum Actual 2020:Q2 Ending Minimum Actual 2020:Q2 Ending Minimum 10.1 13.6 12.1 15.8 9.6 11.7 9.7 7.3 17.3 6.5 11.1 6.2 10.1 7.5 7.3 13.7 6.5 11.1 6.2 9.6 7.5 11.9 14.8 12.6 15.8 10.9 12.9 11.0 9.1 18.5 7.0 11.1 7.5 11.2 8.7 9.1 15.0 7.0 11.1 7.5 10.8 8.7 13.8 16.5 15.1 18.2 13.1 14.7 14.2 11.1 20.2 9.8 13.8 9.7 13.1 12.0 11.1 16.6 9.8 13.8 9.7 12.7 12.0 8.9 10.4 8.5 8.6 9.3 10.0 8.2 6.8 13.3 4.7 6.0 6.3 8.9 6.5 6.8 10.6 4.7 6.0 6.3 8.5 6.5 9.8 9.1 9.5 8.1 7.7 4.8 8.1 7.7 4.8 11.8 10.5 10.7 10.0 9.1 6.0 10.0 9.0 6.0 13.8 12.8 13.0 12.1 11.3 8.4 12.1 11.3 8.4 8.9 8.8 8.6 7.5 7.6 4.8 7.5 7.6 4.8 14.5 16.1 8.9 14.3 10.7 12.4 7.0 15.6 10.7 12.4 7.0 14.8 14.5 16.1 10.4 15.7 10.7 12.4 8.5 16.9 10.7 12.4 8.5 16.2 15.6 16.8 12.6 17.1 12.0 13.7 10.7 18.3 12.0 13.7 10.7 17.6 8.9 9.9 8.4 12.4 6.5 7.5 6.9 13.5 6.5 7.5 6.9 12.6 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Source: Federal Reserve estimates in the alternative severe scenario. Table 11.C. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the alternative severe scenario: 33 participating firms Percent Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Supplementary leverage ratio1 Tier 1 leverage ratio Firm Actual Ending 2020:Q2 33 participating firms 12.2 9.9 Minimum 9.7 Actual Ending 2020:Q2 13.8 11.5 Minimum 11.4 Actual Ending 2020:Q2 16.4 14.1 Minimum 14.1 Actual Ending 2020:Q2 7.9 6.5 Minimum 6.4 Actual Ending 2020:Q2 7.4 5.3 Minimum 5.2 Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. 1 Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Source: Federal Reserve estimates in the alternative severe scenario. 44 December 2020 Stress Test Results Figure 16. Change from 2020:Q2 to minimum CET1 ratio in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=2.4% -2 0 2 4 6 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of risk-weighted assets. 8 10 12 45 Figure 17. Total loan loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=6.8% 0 5 10 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average loan balances. 15 20 46 December 2020 Stress Test Results Table 12. Projected losses, revenue, and net income before taxes through 2022:Q3 under the alternative severe scenario: 33 participating firms Billions of dollars Sum of revenues Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company 33 participating firms Pre-provision net revenue1 Other revenue2 3.7 18.9 32.7 7.6 4.6 0.7 1.0 23.1 48.2 3.7 1.0 -0.7 13.6 5.7 16.0 -0.4 3.2 57.7 4.0 4.3 5.1 1.3 2.1 9.3 1.8 3.6 7.2 4.0 9.8 12.1 2.4 16.8 38.9 363.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Equals Memo items Other effects on capital Other losses/ gains5 Net income before taxes Other comprehensive income6 AOCI included in capital (2022:Q3) 0.1 0.0 2.6 0.0 0.0 0.0 0.0 0.2 1.8 0.1 0.2 0.0 0.0 0.0 4.9 0.0 0.1 3.9 0.3 0.1 4.8 0.1 0.0 0.4 0.0 0.0 0.5 0.0 0.0 0.4 0.1 0.0 1.8 22.4 -3.9 6.6 -34.7 4.3 -0.5 -6.5 -4.3 -12.0 -4.6 -5.0 -1.9 -2.6 -0.7 -3.0 -22.2 -9.2 -1.2 -23.6 -1.5 -4.9 -17.8 -4.1 -0.3 -4.7 -2.9 -1.7 2.2 1.3 -0.3 -6.6 -0.2 -3.6 -28.1 -198.2 0.0 0.0 1.2 -0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.2 0.0 0.0 -3.1 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 0.0 0.0 0.0 0.0 -0.1 -3.1 0.0 -2.9 -0.3 -2.7 0.0 0.0 0.0 -0.1 -35.5 0.0 0.0 -0.2 0.0 0.0 -0.5 0.1 0.0 2.9 0.0 0.0 0.4 0.0 0.3 0.0 0.0 0.0 0.0 -0.9 0.0 0.0 0.0 -0.1 -0.7 -40.4 Minus sum of provisions and losses Credit losses Provisions for Trading and on investment loan and lease counterparty securities losses losses4 (AFS/HTM)3 7.3 12.2 53.4 1.7 4.1 7.2 5.3 34.9 40.2 8.6 0.1 0.9 14.3 8.7 12.7 7.6 4.3 53.5 5.2 9.1 8.0 5.3 2.3 13.4 4.4 5.3 4.5 1.6 9.9 18.2 1.3 20.4 54.2 440.1 0.3 0.0 0.1 0.2 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.7 0.0 0.0 0.1 0.1 0.1 0.1 0.3 0.0 0.0 0.1 0.2 0.1 0.0 0.0 0.6 3.7 0.0 0.0 11.3 1.4 1.0 0.0 0.0 0.0 10.3 0.0 2.6 0.9 0.0 0.0 20.6 1.2 0.0 23.2 0.0 0.0 10.1 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 1.2 0.0 10.4 95.1 Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding. 1 Pre-provision net revenue includes losses from operational-risk events and other real estate owned costs. 2 Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. 3 For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. 4 Trading and counterparty losses include mark-to-market and credit valuation adjustments losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. 5 Other losses/gains includes projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. 6 Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. Source: Federal Reserve estimates in the alternative severe scenario. 47 Table 13. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the alternative severe scenario: 33 participating firms Billions of dollars Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company 33 participating firms Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial1 Commercial real estate, domestic Credit cards Other consumer2 Other loans3 7.7 14.1 57.9 1.6 4.6 6.4 4.8 39.7 52.7 8.3 0.2 0.8 17.4 9.0 13.4 7.2 4.8 67.1 5.7 8.8 7.1 5.2 2.0 15.4 3.8 5.8 8.5 1.3 10.7 18.4 1.0 22.1 57.8 491.2 0.2 0.0 4.4 0.1 0.0 0.1 0.2 0.0 1.7 0.4 0.0 0.1 0.0 0.4 0.0 0.5 0.5 4.1 0.3 0.5 0.5 0.9 0.1 0.4 0.4 0.5 0.2 0.0 0.6 1.0 0.3 1.3 4.7 24.4 0.0 0.0 0.9 0.0 0.0 0.1 0.1 0.0 0.7 0.5 0.0 0.0 0.1 0.2 0.0 0.1 0.2 0.6 0.2 0.1 0.0 0.1 0.0 0.3 0.0 0.2 0.2 0.0 0.3 0.4 0.0 0.5 0.7 6.6 2.3 5.0 17.0 0.1 0.0 3.0 1.5 4.6 10.5 2.4 0.0 0.0 0.0 3.5 4.8 2.0 1.5 18.7 2.3 1.3 1.2 1.7 0.3 6.7 0.9 2.1 0.8 0.3 2.3 4.4 0.1 6.6 13.2 121.4 0.3 0.0 11.8 0.4 0.0 1.6 1.6 1.9 2.6 2.5 0.1 0.6 0.0 3.1 3.1 3.6 1.6 4.7 1.6 5.7 2.1 1.4 0.3 4.5 1.5 1.7 1.0 0.1 2.2 6.6 0.0 6.3 17.9 92.4 0.0 8.7 16.0 0.0 4.4 0.1 0.1 25.2 28.0 0.4 0.0 0.0 15.6 0.6 0.5 0.4 0.1 25.7 0.2 0.1 0.0 0.1 0.0 1.4 0.0 0.2 0.1 0.0 3.5 0.6 0.0 4.6 7.5 144.1 4.7 0.3 1.4 0.4 0.0 0.3 1.0 6.8 2.1 1.6 0.0 0.0 1.6 0.7 0.8 0.0 0.8 2.2 0.5 0.7 0.2 0.6 0.0 0.9 0.2 0.7 6.1 0.0 0.8 3.7 0.2 1.5 3.7 44.6 0.2 0.0 6.3 0.6 0.1 1.2 0.4 1.1 7.2 0.4 0.1 0.1 0.0 0.4 4.2 0.6 0.2 11.2 0.5 0.3 3.0 0.5 1.2 1.2 0.7 0.5 0.2 0.9 0.9 1.8 0.3 1.3 10.0 57.7 Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding. 1 Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. 2 Other consumer loans include student loans and automobile loans. 3 Other loans include international real estate loans. Source: Federal Reserve estimates in the alternative severe scenario. 48 December 2020 Stress Test Results Table 14. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the alternative severe scenario: 33 participating firms Percent of average loan balances1 Firm Ally Financial Inc. American Express Company Bank of America Corporation The Bank of New York Mellon Corporation Barclays US LLC BMO Financial Corp. BNP Paribas USA, Inc. Capital One Financial Corporation Citigroup Inc. Citizens Financial Group, Inc. Credit Suisse Holdings (USA), Inc. DB USA Corporation Discover Financial Services Fifth Third Bancorp The Goldman Sachs Group, Inc. HSBC North America Holdings Inc. Huntington Bancshares Incorporated JPMorgan Chase & Co. KeyCorp M&T Bank Corporation Morgan Stanley MUFG Americas Holdings Corporation Northern Trust Corporation The PNC Financial Services Group, Inc. RBC US Group Holdings LLC Regions Financial Corporation Santander Holdings USA, Inc. State Street Corporation TD Group US Holdings LLC Truist Financial Corporation UBS Americas Holding LLC U.S. Bancorp Wells Fargo & Company 33 participating firms Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 6.6 12.6 5.8 2.9 12.6 7.5 7.3 15.9 7.7 6.8 1.6 6.8 19.5 8.2 10.0 10.4 6.5 7.0 5.7 9.7 4.4 6.2 5.9 6.3 6.5 6.8 9.5 5.0 6.3 6.1 1.9 7.3 6.3 7.3 1.3 0.0 1.9 1.2 0.0 1.8 2.2 2.4 2.1 2.2 0.0 2.4 2.4 2.5 2.4 2.9 3.6 1.9 2.7 3.3 1.6 2.7 1.0 1.4 3.0 2.6 2.7 0.0 2.0 1.9 1.9 1.8 1.8 2.0 3.7 0.0 2.3 7.2 0.0 3.5 3.2 6.6 7.0 4.1 0.0 5.9 9.5 3.7 3.8 7.9 3.0 2.0 3.8 3.5 3.8 3.3 7.6 1.8 3.3 4.2 3.7 0.0 3.9 2.6 0.0 3.9 1.9 3.0 8.0 13.8 5.9 3.0 21.5 8.0 10.2 12.9 5.7 6.3 0.0 1.2 25.7 7.8 12.8 6.8 7.3 10.3 6.0 7.3 8.6 10.4 6.4 7.1 11.2 7.9 5.0 6.8 6.6 6.1 2.5 7.5 7.3 7.6 5.4 0.0 15.5 8.4 11.7 14.3 10.6 6.0 10.8 14.5 45.2 15.9 20.2 19.7 42.6 31.9 15.6 3.9 10.8 15.5 16.8 7.4 7.9 12.4 10.2 12.0 6.6 5.8 7.7 11.2 1.8 16.3 14.0 11.9 0.0 11.9 19.0 0.0 20.4 19.4 21.7 25.4 19.6 22.6 0.0 0.0 22.3 26.3 21.7 33.0 21.7 20.2 21.7 21.7 0.0 21.7 0.0 23.8 21.7 17.7 21.7 0.0 27.6 17.5 21.7 21.7 21.0 20.3 7.2 15.8 1.9 11.4 15.8 4.5 6.8 10.8 7.2 6.1 15.8 7.5 9.1 4.7 10.5 10.7 4.4 3.6 4.7 6.7 0.9 16.1 15.8 3.8 12.9 12.2 15.9 0.6 3.2 6.7 0.9 3.5 5.1 6.0 14.4 5.7 3.3 1.8 0.7 6.2 3.5 5.6 3.3 6.3 0.6 2.6 5.6 4.4 5.3 7.5 3.9 4.8 3.0 5.1 3.7 4.5 6.5 3.1 3.8 3.1 2.5 4.6 3.2 3.8 6.9 4.7 5.0 4.1 Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding. 1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 2 Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. 3 Other consumer loans include student loans and automobile loans. 4 Other loans include international real estate loans. Source: Federal Reserve estimates in the alternative severe scenario. 49 Figure 18. PPNR rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=2.0% -2 0 2 4 6 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets. 8 10 12 50 December 2020 Stress Test Results Figure 19. Pre-tax net income rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo -3.5 Median=-1.3% -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 Percent Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets. 1.0 1.5 2.0 2.5 3.0 3.5 51 Appendix A: Supervisory Scenarios This appendix includes the historical data and scenarios provided by the Federal Reserve. rather are hypothetical scenarios designed to assess the strength of banking organizations and their resilience to adverse economic environments. It is important to note that the severely adverse and alternative severe scenarios are not forecasts but Table A.1. Historical data: Domestic variables, Q1:2000–Q2:2020 Percent, unless otherwise indicated. Level Date Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Real Nominal Nominal dispodispo- UnemCPI 3-month 5-year 10-year BBB Real GDP Mortgage GDP sable sable ployment inflation Treasury Treasury Treasury corporate growth rate growth income income rate rate rate yield yield yield growth growth 1.5 7.5 0.5 2.5 -1.1 2.4 -1.6 1.1 3.5 2.4 1.8 0.6 2.2 3.5 7.0 4.7 2.2 3.1 3.8 4.1 4.5 1.9 3.6 2.5 5.4 0.9 0.6 3.5 0.9 2.3 2.2 2.5 4.2 10.2 2.8 4.7 1.3 4.9 -0.1 2.4 4.9 3.9 3.7 2.9 4.1 4.7 9.3 7.2 5.2 6.5 6.6 7.3 7.9 4.7 7.4 5.9 8.4 4.4 3.5 5.0 5.0 5.0 4.3 4.1 7.9 4.5 4.7 1.4 3.7 -0.7 9.6 -5.0 9.3 2.7 -0.3 2.4 0.9 5.0 6.9 1.1 1.9 4.7 2.6 5.1 -4.6 3.9 1.2 5.2 8.0 1.0 1.0 5.4 3.4 1.0 0.4 0.3 11.5 6.4 7.3 3.7 6.5 1.2 9.8 -4.7 10.1 5.9 1.6 4.3 3.8 5.1 9.6 2.9 5.3 7.6 4.7 8.8 -2.4 6.4 5.6 8.6 10.2 4.3 4.0 4.7 7.4 4.3 2.6 4.3 4.0 3.9 4.0 3.9 4.2 4.4 4.8 5.5 5.7 5.8 5.7 5.9 5.9 6.1 6.1 5.8 5.7 5.6 5.4 5.4 5.3 5.1 5.0 5.0 4.7 4.6 4.6 4.4 4.5 4.5 4.7 4.8 4.0 3.2 3.7 2.9 3.9 2.8 1.1 -0.3 1.3 3.2 2.2 2.4 4.2 -0.7 3.0 1.5 3.4 3.2 2.6 4.4 2.0 2.7 6.2 3.8 2.1 3.7 3.8 -1.6 4.0 4.6 2.6 5.0 5.5 5.7 6.0 6.0 4.8 3.7 3.2 1.9 1.7 1.7 1.6 1.3 1.2 1.0 0.9 0.9 0.9 1.1 1.5 2.0 2.5 2.9 3.4 3.8 4.4 4.7 4.9 4.9 5.0 4.7 4.3 3.4 6.6 6.5 6.1 5.6 4.9 4.9 4.6 4.2 4.5 4.5 3.4 3.1 2.9 2.6 3.1 3.2 3.0 3.7 3.5 3.5 3.9 3.9 4.0 4.4 4.6 5.0 4.8 4.6 4.6 4.7 4.5 3.8 6.7 6.4 6.1 5.8 5.3 5.5 5.3 5.1 5.4 5.4 4.5 4.3 4.2 3.8 4.4 4.4 4.1 4.7 4.4 4.3 4.4 4.2 4.3 4.6 4.7 5.2 5.0 4.7 4.8 4.9 4.8 4.4 8.3 8.6 8.2 8.0 7.5 7.5 7.2 7.1 7.4 7.5 7.2 6.9 6.2 5.3 5.6 5.4 5.0 5.7 5.4 5.1 5.2 5.4 5.4 5.8 5.8 6.3 6.3 6.0 6.0 6.2 6.5 6.3 8.3 8.3 8.0 7.6 7.0 7.1 7.0 6.8 7.0 6.8 6.3 6.1 5.8 5.5 6.0 5.9 5.6 6.1 5.9 5.7 5.8 5.7 5.8 6.2 6.2 6.6 6.6 6.2 6.2 6.4 6.6 6.2 Prime rate 8.7 9.2 9.5 9.5 8.6 7.3 6.6 5.2 4.8 4.8 4.8 4.5 4.3 4.2 4.0 4.0 4.0 4.0 4.4 4.9 5.4 5.9 6.4 7.0 7.4 7.9 8.3 8.3 8.3 8.3 8.2 7.5 Dow Jones Total Stock Market Index House Price Index 14,296 13,619 13,613 12,176 10,646 11,407 9,563 10,708 10,776 9,384 7,774 8,343 8,052 9,342 9,650 10,800 11,039 11,145 10,894 11,952 11,637 11,857 12,283 12,497 13,122 12,809 13,323 14,216 14,354 15,163 15,318 14,754 102 105 107 110 112 114 116 118 120 124 127 129 132 135 139 143 148 154 159 165 172 179 185 190 193 193 191 191 189 183 178 172 Commercial Market Real Volatility Estate Index Price Index 127 126 139 144 143 142 144 139 139 140 141 145 152 151 149 147 154 164 174 179 179 185 190 198 204 212 220 222 230 239 247 247 27.0 33.5 21.9 31.7 32.8 34.7 43.7 35.3 26.1 28.4 45.1 42.6 34.7 29.1 22.7 21.1 21.6 20.0 19.3 16.6 14.7 17.7 14.2 16.5 14.6 23.8 18.6 12.7 19.6 18.9 30.8 31.1 (continued) 52 December 2020 Stress Test Results Table A.1.—continued Level Date Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Real Nominal Nominal dispodispo- UnemCPI 3-month 5-year 10-year BBB Real GDP Mortgage GDP sable sable ployment inflation Treasury Treasury Treasury corporate growth rate growth income income rate rate rate yield yield yield growth growth -2.3 2.1 -2.1 -8.4 -4.4 -0.6 1.5 4.5 1.5 3.7 3.0 2.0 -1.0 2.9 -0.1 4.7 3.2 1.7 0.5 0.5 3.6 0.5 3.2 3.2 -1.1 5.5 5.0 2.3 3.9 2.7 1.5 0.6 2.3 1.3 2.2 2.5 2.3 1.7 2.9 3.9 3.8 2.7 2.1 1.3 2.9 1.5 2.6 2.4 -5.0 -31.7 -0.8 4.3 0.8 -7.2 -4.5 -1.2 1.9 5.9 2.6 5.7 4.2 4.3 1.2 5.6 2.5 5.4 5.8 3.3 2.6 2.5 5.3 1.7 5.2 5.7 0.5 7.9 6.8 2.9 3.5 5.0 2.7 0.7 2.0 4.1 3.6 4.6 4.4 3.0 5.0 6.7 6.2 6.3 3.8 3.3 4.0 4.1 4.0 3.9 -3.4 -33.3 1.1 7.5 -8.1 3.5 -1.7 4.4 -4.4 -0.1 2.3 6.8 2.9 2.3 4.1 -0.9 1.8 1.2 7.7 3.7 -2.8 11.5 -15.1 3.0 1.7 1.6 5.7 5.6 4.8 5.4 6.1 1.1 2.8 2.3 3.1 -0.3 1.9 2.5 4.3 4.4 2.7 2.3 5.2 3.6 3.3 2.8 3.3 -1.0 2.1 1.9 2.6 47.0 4.6 12.0 -4.3 -2.5 -4.0 6.3 -1.8 3.0 3.7 7.2 3.6 4.8 7.8 3.1 3.7 2.6 10.7 4.7 -1.7 14.1 -13.9 3.3 3.4 3.3 7.7 7.6 5.9 4.9 4.3 3.2 3.9 2.0 3.4 2.1 3.6 4.4 6.6 5.3 4.4 5.0 8.0 5.9 4.9 4.2 3.9 1.5 3.5 3.4 3.9 44.4 5.0 5.3 6.0 6.9 8.3 9.3 9.6 9.9 9.8 9.6 9.5 9.5 9.0 9.1 9.0 8.6 8.3 8.2 8.0 7.8 7.7 7.5 7.2 6.9 6.7 6.2 6.1 5.7 5.5 5.4 5.1 5.0 4.9 4.9 4.9 4.8 4.6 4.4 4.3 4.1 4.1 3.9 3.8 3.8 3.9 3.6 3.6 3.5 3.8 13.0 4.4 5.3 6.3 -8.9 -2.7 2.1 3.5 3.2 0.6 -0.1 1.2 3.3 4.3 4.6 2.6 1.8 2.3 0.8 1.8 2.7 1.6 -0.4 2.2 1.5 2.5 2.1 1.0 -1.0 -2.6 2.8 1.5 0.0 -0.1 2.9 1.9 2.6 2.8 0.4 2.2 3.1 3.2 2.2 2.1 1.3 0.9 3.0 1.8 2.4 1.2 -3.5 2.1 1.6 1.5 0.3 0.2 0.2 0.2 0.1 0.1 0.1 0.2 0.1 0.1 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.3 0.3 0.3 0.4 0.6 0.9 1.0 1.2 1.6 1.8 2.0 2.3 2.4 2.3 2.0 1.6 1.1 0.1 2.8 3.2 3.1 2.2 1.9 2.3 2.5 2.3 2.4 2.3 1.6 1.5 2.1 1.8 1.1 1.0 0.9 0.8 0.7 0.7 0.8 0.9 1.5 1.4 1.6 1.7 1.7 1.6 1.5 1.5 1.6 1.6 1.4 1.3 1.2 1.7 2.0 1.8 1.8 2.1 2.5 2.8 2.8 2.9 2.5 2.1 1.7 1.6 1.2 0.4 3.9 4.1 4.1 3.7 3.2 3.7 3.8 3.7 3.9 3.6 2.9 3.0 3.5 3.3 2.5 2.1 2.1 1.8 1.6 1.7 1.9 2.0 2.7 2.8 2.8 2.7 2.5 2.3 2.0 2.2 2.3 2.2 2.0 1.8 1.6 2.2 2.5 2.3 2.3 2.4 2.8 2.9 2.9 3.0 2.7 2.4 1.8 1.8 1.4 0.7 6.4 6.7 7.1 9.7 9.1 8.1 6.5 5.8 5.6 5.4 4.8 4.7 5.0 4.8 4.5 4.8 4.4 4.3 3.9 3.6 3.7 3.8 4.7 4.5 4.4 4.0 3.9 4.0 3.9 3.9 4.3 4.4 4.5 3.9 3.5 3.9 4.0 3.8 3.7 3.7 4.1 4.5 4.5 4.8 4.5 4.0 3.4 3.3 3.4 3.4 5.9 6.1 6.3 5.8 5.1 5.0 5.2 4.9 5.0 4.9 4.4 4.4 4.8 4.7 4.3 4.0 3.9 3.8 3.6 3.4 3.5 3.7 4.4 4.3 4.4 4.2 4.1 4.0 3.7 3.8 4.0 3.9 3.7 3.6 3.4 3.8 4.2 4.0 3.9 3.9 4.3 4.5 4.6 4.8 4.4 4.0 3.7 3.7 3.5 3.2 Prime rate 6.2 5.1 5.0 4.1 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.5 3.5 3.5 3.5 3.8 4.0 4.3 4.3 4.5 4.8 5.0 5.3 5.5 5.5 5.3 4.8 4.4 3.3 Dow Jones Total Stock Market Index House Price Index 13,284 13,016 11,826 9,057 8,044 9,343 10,813 11,385 12,033 10,646 11,814 13,132 13,909 13,844 11,677 13,019 14,628 14,100 14,895 14,835 16,396 16,771 17,718 19,413 19,711 20,569 20,459 21,425 21,708 21,631 19,959 21,101 21,179 21,622 22,469 23,277 24,508 25,125 26,149 27,673 27,383 28,314 30,190 25,725 29,194 30,244 30,442 33,035 25,985 31,577 165 157 150 143 138 138 139 139 139 139 136 135 133 133 134 134 135 138 141 144 148 152 155 158 160 161 164 166 168 170 173 175 177 179 182 185 187 190 193 196 199 201 203 205 206 208 210 213 213 216 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. Commercial Market Real Volatility Estate Index Price Index 234 224 230 219 209 180 161 159 154 167 167 168 171 173 169 176 180 178 184 184 188 197 207 211 209 214 218 226 240 243 245 246 238 242 254 258 255 264 268 277 272 286 278 280 288 301 309 301 304 305 32.2 24.1 46.7 80.9 56.7 42.3 31.3 30.7 27.3 45.8 32.9 23.5 29.4 22.7 48.0 45.5 23.0 26.7 20.5 22.7 19.0 20.5 17.0 20.3 21.4 17.0 17.0 26.3 22.4 18.9 40.7 24.4 28.1 25.8 18.1 22.5 13.1 16.0 16.0 13.1 37.3 23.6 16.1 36.1 25.5 20.6 24.6 20.6 82.7 57.1 53 Table A.2. Historical data: International variables, Q1:2000–Q2:2020 Percent, unless otherwise indicated. Date Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Euro area real GDP growth Euro area inflation Euro area bilateral dollar exchange rate (USD/euro) 4.9 3.6 2.3 2.7 4.1 0.4 0.6 0.5 0.2 2.2 1.7 0.7 -1.4 0.4 2.3 3.0 2.0 2.4 1.0 1.4 1.0 2.3 3.0 2.5 3.7 4.4 2.3 4.8 2.6 2.8 1.7 2.3 1.8 -1.4 -2.1 -6.8 -12.0 -0.1 1.5 1.9 1.6 4.0 1.8 2.5 3.4 0.1 0.4 -1.5 -0.9 -1.2 2.6 0.9 3.4 2.8 1.2 4.0 1.5 1.7 3.1 2.0 1.6 2.3 3.3 0.5 2.1 2.3 2.2 2.6 2.0 2.4 1.4 2.2 3.1 2.5 1.7 2.5 2.0 0.9 2.3 2.3 2.1 4.9 4.2 3.2 3.2 -1.4 -1.0 0.0 1.1 1.6 1.8 1.9 1.6 2.6 3.7 3.1 1.3 3.5 2.9 2.2 0.957 0.955 0.884 0.939 0.879 0.847 0.910 0.890 0.872 0.986 0.988 1.049 1.090 1.150 1.165 1.260 1.229 1.218 1.242 1.354 1.297 1.210 1.206 1.184 1.214 1.278 1.269 1.320 1.337 1.352 1.422 1.460 1.581 1.575 1.408 1.392 1.326 1.402 1.463 1.433 1.353 1.229 1.360 1.327 1.418 1.452 1.345 1.297 1.333 1.267 Developing Asia real GDP growth 7.3 6.9 7.8 3.6 4.8 5.3 4.9 8.4 7.8 8.1 7.3 6.7 6.6 1.9 14.6 12.8 5.8 7.1 8.2 6.3 10.6 8.7 9.4 11.6 10.9 7.2 10.1 11.4 13.9 10.6 8.6 13.1 7.1 6.0 2.9 0.6 4.2 15.0 12.6 9.7 9.7 9.5 8.7 9.6 9.7 6.8 5.6 6.5 7.7 5.8 Developing Asia inflation Developing Asia bilateral dollar exchange rate (F/USD, index) Japan real GDP growth 1.5 -0.3 2.2 2.5 1.7 2.1 1.3 0.0 0.5 1.1 1.5 0.8 3.6 1.1 0.1 5.5 4.0 4.1 4.1 0.8 2.9 1.5 2.4 1.6 2.4 3.2 2.2 3.6 3.6 4.9 7.6 5.9 8.1 6.3 3.0 -1.1 -1.4 2.3 4.1 5.0 4.4 3.4 4.2 7.5 6.2 5.4 5.3 3.0 3.2 3.9 100.0 100.7 101.4 105.2 106.1 106.2 106.5 106.9 107.4 104.8 105.5 104.5 105.5 104.0 102.6 103.4 101.4 102.8 102.7 98.9 98.5 98.9 98.5 98.1 96.7 96.6 96.2 94.5 93.9 91.8 90.5 89.4 88.0 88.7 91.6 92.3 94.3 92.3 91.3 90.7 89.8 91.1 88.4 87.4 86.5 85.3 87.4 87.3 86.3 88.1 7.4 1.1 0.3 4.0 2.2 -2.0 -4.0 -1.2 0.7 3.0 1.3 1.0 0.3 2.5 1.6 4.5 2.9 0.1 2.5 -0.8 2.0 2.7 3.9 0.7 0.7 1.0 -0.7 5.3 3.0 0.5 -1.9 1.9 1.0 -1.5 -4.9 -9.4 -17.8 8.6 0.2 5.6 3.5 5.5 7.4 -3.2 -5.5 -2.6 10.3 -0.6 4.9 -2.9 Japan inflation Japan bilateral dollar exchange rate (yen/USD) U.K. real GDP growth U.K. inflation U.K. bilateral dollar exchange rate (USD/pound) -0.5 -1.1 -0.3 -1.1 0.7 -2.3 -0.5 -1.9 -1.1 0.1 -0.4 -0.8 0.0 0.3 -0.5 -1.0 0.8 -0.4 -0.1 1.9 -1.2 -1.0 -1.0 0.1 1.2 0.4 0.4 -0.5 -0.7 0.4 0.3 2.2 1.2 1.8 3.4 -2.1 -3.6 -1.6 -1.4 -1.5 1.0 -1.4 -1.9 1.3 -0.1 -0.7 0.3 -0.6 2.2 -1.4 102.7 106.1 107.9 114.4 125.5 124.7 119.2 131.0 132.7 119.9 121.7 118.8 118.1 119.9 111.4 107.1 104.2 109.4 110.2 102.7 107.2 110.9 113.3 117.9 117.5 114.5 118.0 119.0 117.6 123.4 115.0 111.7 99.9 106.2 105.9 90.8 99.2 96.4 89.5 93.1 93.4 88.5 83.5 81.7 82.8 80.6 77.0 77.0 82.4 79.8 3.1 2.3 1.1 0.6 5.8 3.4 3.2 1.5 1.8 2.0 3.1 3.5 2.7 3.8 4.2 3.4 2.2 1.4 0.7 1.3 3.4 5.1 4.6 6.1 1.6 1.0 0.4 2.1 3.8 2.5 3.1 1.9 2.2 -2.2 -6.1 -8.0 -6.8 -1.0 0.3 1.2 2.6 4.1 2.7 0.3 2.5 0.4 1.2 0.7 2.6 -0.3 0.5 0.4 1.0 1.9 0.1 3.1 1.0 0.0 1.9 0.9 1.4 1.9 1.6 0.3 1.7 1.6 1.3 1.0 1.1 2.4 2.5 1.9 2.7 1.4 1.9 3.0 3.3 2.6 2.6 1.7 0.2 4.0 3.7 5.7 5.8 0.5 -0.1 2.2 3.5 3.0 4.0 3.2 2.3 4.0 6.7 4.7 3.7 3.4 2.1 2.0 1.592 1.513 1.479 1.496 1.419 1.408 1.469 1.454 1.425 1.525 1.570 1.610 1.579 1.653 1.662 1.784 1.840 1.813 1.809 1.916 1.889 1.793 1.770 1.719 1.739 1.849 1.872 1.959 1.969 2.006 2.039 1.984 1.986 1.991 1.780 1.462 1.430 1.645 1.600 1.617 1.519 1.495 1.573 1.539 1.605 1.607 1.562 1.554 1.599 1.569 (continued) 54 December 2020 Stress Test Results Table A.2.—continued Date Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Euro area real GDP growth Euro area inflation Euro area bilateral dollar exchange rate (USD/euro) -0.5 -1.6 -1.6 2.2 1.3 1.0 1.8 0.7 1.9 1.6 2.7 1.8 1.8 1.8 2.3 1.0 1.8 3.1 3.0 2.7 3.3 3.4 0.8 1.4 0.6 1.8 2.1 0.5 1.3 0.2 -14.1 -39.4 1.5 2.5 1.3 0.2 1.1 0.5 1.0 -0.3 0.1 -0.1 -0.7 2.5 -0.2 -0.4 -1.4 1.5 1.2 1.7 2.7 0.5 0.9 1.5 2.2 2.2 2.5 0.8 0.2 2.1 0.6 1.0 0.7 -1.4 1.286 1.319 1.282 1.301 1.354 1.378 1.378 1.369 1.263 1.210 1.074 1.115 1.116 1.086 1.139 1.103 1.124 1.055 1.070 1.141 1.181 1.202 1.232 1.168 1.162 1.146 1.123 1.137 1.091 1.123 1.102 1.124 Developing Asia real GDP growth 6.6 7.2 6.8 6.3 7.7 6.8 6.3 7.4 6.5 5.7 6.4 6.9 6.4 5.5 7.1 7.0 6.5 5.8 6.3 6.5 6.7 6.4 7.0 5.7 4.6 6.3 6.3 4.8 2.9 6.6 -25.7 34.1 Developing Asia inflation Developing Asia bilateral dollar exchange rate (F/USD, index) Japan real GDP growth 2.2 3.5 4.6 2.8 3.5 4.0 1.4 2.6 2.4 1.1 0.9 2.7 2.7 1.2 3.0 2.9 1.2 1.7 1.2 2.2 2.3 2.6 2.4 1.8 3.0 1.1 1.1 5.0 3.5 6.5 3.8 -2.1 86.3 86.0 86.3 87.2 86.6 85.8 86.9 86.7 87.0 88.1 88.1 88.5 91.1 92.3 91.8 94.3 93.7 97.6 95.2 94.8 93.7 91.1 89.1 93.5 97.2 96.2 94.7 96.4 99.8 98.0 101.9 97.3 -1.5 1.1 5.0 3.1 3.4 -0.1 4.0 -7.5 0.4 2.0 5.6 0.4 -0.2 -1.5 2.1 0.5 0.9 1.2 4.8 1.2 2.3 1.9 -1.7 1.5 -3.2 2.3 2.8 1.6 0.2 -7.0 -2.3 -28.1 Japan inflation Japan bilateral dollar exchange rate (yen/USD) U.K. real GDP growth U.K. inflation U.K. bilateral dollar exchange rate (USD/pound) -1.9 0.1 0.6 0.0 2.7 2.6 1.0 8.3 1.8 -0.8 0.4 0.8 0.5 -1.1 -0.4 -0.1 -0.4 2.0 -0.5 0.7 0.4 1.9 2.3 -1.8 2.3 0.4 0.1 0.7 0.3 0.9 0.3 -1.2 77.9 86.6 94.2 99.2 98.3 105.3 103.0 101.3 109.7 119.9 120.0 122.1 119.8 120.3 112.4 102.8 101.2 116.8 111.4 112.4 112.6 112.7 106.2 110.7 113.5 109.7 110.7 107.8 108.1 108.7 107.5 107.8 5.0 -0.6 2.6 2.2 3.8 2.1 2.7 2.6 2.3 2.3 2.1 2.9 1.7 3.0 0.7 2.1 1.8 2.6 2.3 1.0 1.4 1.6 0.2 2.1 2.4 0.9 2.7 -0.2 2.1 0.0 -8.5 -59.8 2.2 4.0 2.9 1.7 2.1 1.6 1.9 1.4 0.7 -0.4 -1.1 0.7 0.6 0.1 0.1 0.7 2.0 2.1 3.8 3.1 2.3 3.0 2.5 1.9 2.5 2.1 1.0 2.6 1.6 0.4 2.0 -1.5 1.613 1.626 1.519 1.521 1.618 1.657 1.668 1.711 1.622 1.558 1.485 1.573 1.512 1.475 1.438 1.324 1.302 1.234 1.254 1.300 1.340 1.353 1.403 1.320 1.305 1.276 1.303 1.270 1.231 1.327 1.245 1.237 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. 55 Table A.3. Supervisory baseline scenario: Domestic variables, Q3:2020–Q3:2023 Percent, unless otherwise indicated. Level Date Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Real Nominal Nominal dispodispo- UnemCPI 3-month 5-year 10-year BBB Real GDP Mortgage GDP sable sable ployment inflation Treasury Treasury Treasury corporate growth rate growth income income rate rate rate yield yield yield growth growth 24.0 4.9 4.6 4.2 4.1 3.6 3.3 3.0 2.8 2.7 2.5 2.4 2.3 26.7 6.4 6.4 6.0 5.8 5.4 4.4 4.0 4.0 4.0 4.0 4.0 4.0 -14.4 -3.3 -4.8 1.3 2.2 1.5 3.4 2.1 2.1 2.1 2.1 2.1 2.1 -12.7 -1.6 -3.0 3.0 4.0 3.3 5.6 4.1 4.1 4.1 4.1 4.1 4.1 9.5 8.7 8.1 7.5 7.0 6.6 6.3 6.0 5.8 5.7 5.5 5.4 5.3 3.7 1.9 2.1 1.9 2.0 2.0 2.3 2.2 2.2 2.2 2.2 2.2 2.2 0.1 0.1 0.1 0.2 0.2 0.2 0.4 0.5 0.7 0.8 0.9 1.0 1.1 0.3 0.4 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.3 0.6 0.8 0.9 0.9 1.0 1.1 1.2 1.3 1.5 1.6 1.7 1.8 1.9 2.4 2.4 2.5 2.5 2.6 2.7 2.8 3.0 3.1 3.2 3.4 3.5 3.5 3.0 2.8 2.7 2.7 2.7 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 Prime rate 3.3 3.2 3.2 3.2 3.2 3.2 3.4 3.6 3.7 3.8 3.9 4.0 4.1 Dow Jones Total Stock Market Index House Price Index 34,528 34,805 35,090 35,385 35,683 35,986 36,295 36,610 36,930 37,256 37,588 37,924 38,266 218 220 222 224 226 228 231 233 235 237 239 242 244 Commercial Market Real Volatility Estate Index Price Index 305 299 293 284 274 277 279 282 285 288 290 293 296 33.6 28.9 26.9 26.3 26.2 26.2 26.3 26.3 26.3 26.3 26.4 26.4 26.4 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. Table A.4. Supervisory baseline scenario: International variables, Q3:2020–Q3:2023 Percent, unless otherwise indicated. Date Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Euro area real GDP growth Euro area inflation Euro area bilateral dollar exchange rate (USD/euro) 35.0 18.7 3.3 1.2 2.5 3.7 5.0 4.3 3.7 3.2 2.6 1.9 1.3 0.2 1.0 1.2 1.5 1.3 1.2 1.0 1.1 1.1 1.2 1.2 1.3 1.4 1.149 1.174 1.182 1.190 1.198 1.206 1.206 1.206 1.206 1.206 1.206 1.206 1.206 Developing Asia real GDP growth 1.0 1.6 6.2 10.7 8.8 6.9 4.8 5.0 5.2 5.5 5.7 7.2 8.9 Developing Asia inflation Developing Asia bilateral dollar exchange rate (F/USD, index) Japan real GDP growth 2.1 2.0 3.3 2.1 2.5 2.9 3.3 3.3 3.3 3.3 3.4 2.9 2.5 98.3 99.3 99.1 98.8 98.6 98.3 98.3 98.3 98.3 98.3 98.3 98.3 98.3 20.0 4.9 2.3 1.0 2.1 3.1 4.1 3.6 3.2 2.7 2.3 1.7 1.1 Japan inflation Japan bilateral dollar exchange rate (yen/USD) U.K. real GDP growth U.K. inflation U.K. bilateral dollar exchange rate (USD/pound) -1.3 -1.0 0.8 1.3 0.9 0.6 0.2 0.2 0.2 0.2 0.3 0.6 0.9 107.1 106.3 106.4 106.5 106.6 106.7 106.7 106.7 106.7 106.7 106.7 106.7 106.7 80.0 16.3 6.1 1.4 2.8 4.2 5.6 5.0 4.4 3.8 3.2 2.4 1.6 -0.1 2.5 1.1 1.7 1.8 1.8 1.9 2.0 2.0 2.1 2.2 2.1 1.9 1.265 1.294 1.310 1.326 1.343 1.359 1.359 1.359 1.359 1.359 1.359 1.359 1.359 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. 56 December 2020 Stress Test Results Table A.5. Supervisory severely adverse scenario: Domestic variables, Q3:2020–Q3:2023 Percent, unless otherwise indicated. Level Date Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Real Nominal Nominal dispodispo- UnemCPI 3-month 5-year 10-year BBB Real GDP Mortgage GDP sable sable ployment inflation Treasury Treasury Treasury corporate growth rate growth income income rate rate rate yield yield yield growth growth 24.0 -5.9 -3.6 -2.5 -0.2 -0.2 5.7 8.2 10.8 10.8 8.2 5.7 5.3 26.5 -5.3 -2.6 -1.8 0.4 0.7 6.2 8.6 11.1 11.3 8.9 6.7 6.5 -12.3 -14.2 -12.8 -5.6 -3.1 -2.4 3.5 3.7 5.3 5.6 4.2 2.7 2.1 -10.6 -13.4 -11.8 -4.6 -1.9 -1.2 5.5 5.7 7.6 7.8 6.2 4.5 3.9 9.5 10.5 11.3 11.9 12.2 12.5 12.0 11.3 10.2 9.2 8.4 8.0 7.6 3.6 1.2 1.4 1.2 1.4 1.4 2.1 2.2 2.3 2.3 2.1 2.0 2.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.4 0.4 0.5 0.6 0.7 0.8 0.3 0.3 0.3 0.4 0.5 0.6 0.7 0.8 1.0 1.1 1.2 1.4 1.5 2.1 5.0 5.7 6.1 5.7 5.4 5.1 4.8 4.5 4.2 3.9 3.6 3.3 2.7 3.7 3.8 3.9 3.8 3.7 3.6 3.5 3.5 3.4 3.3 3.3 3.2 Prime rate 3.3 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 Dow Jones Total Stock Market Index House Price Index 35,961 25,124 19,841 18,009 18,530 19,275 20,479 21,952 23,779 25,918 28,338 31,069 34,231 220 208 198 190 182 174 168 163 161 161 164 165 168 Commercial Market Real Volatility Estate Index Price Index 305 298 291 282 268 255 241 227 218 213 213 214 215 33.6 70.0 68.1 64.3 53.6 46.8 41.8 37.8 34.3 32.1 30.4 28.1 26.5 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. Table A.6. Supervisory severely adverse scenario: International variables, Q3:2020–Q3:2023 Percent, unless otherwise indicated. Date Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Euro area real GDP growth Euro area inflation Euro area bilateral dollar exchange rate (USD/euro) 35.0 -3.6 -3.0 -2.1 -1.8 -1.6 1.0 5.0 7.0 8.0 9.0 10.0 11.0 0.2 -0.1 -0.2 0.4 0.2 0.2 -0.1 -0.5 -0.8 -0.8 -0.5 -0.1 0.5 1.124 1.101 1.074 1.053 1.048 1.045 1.043 1.048 1.058 1.080 1.090 1.101 1.113 Developing Asia real GDP growth 1.0 -1.0 3.7 8.8 7.6 6.3 4.8 5.2 5.7 6.1 6.3 8.1 10.2 Developing Asia inflation Developing Asia bilateral dollar exchange rate (F/USD, index) Japan real GDP growth 2.4 0.1 -0.7 -0.5 -1.1 -0.7 -1.0 -0.7 -0.2 0.2 0.8 1.2 1.6 97.3 98.9 100.9 102.5 102.9 103.1 103.4 102.9 102.1 100.5 99.7 98.9 98.1 20.0 -6.9 -4.5 -2.7 -2.2 -1.8 1.0 3.5 4.5 5.5 6.0 6.5 7.5 Japan inflation Japan bilateral dollar exchange rate (yen/USD) U.K. real GDP growth U.K. inflation U.K. bilateral dollar exchange rate (USD/pound) -0.3 -1.3 -1.6 -1.6 -1.7 -1.5 -1.9 -2.1 -2.1 -1.8 -1.3 -0.7 -0.1 107.8 107.2 106.7 106.2 105.9 105.7 105.6 105.9 106.2 106.4 106.7 107.0 107.2 80.0 -2.7 -3.1 -2.3 -2.1 -1.9 1.0 5.0 7.0 8.0 9.0 10.0 11.0 0.3 0.4 -0.2 0.3 0.3 0.0 0.0 -0.1 -0.1 0.1 0.5 1.0 1.5 1.237 1.212 1.182 1.159 1.153 1.150 1.148 1.153 1.165 1.188 1.200 1.212 1.225 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. 57 Table A.7. Supervisory alternative severe scenario: Domestic variables, Q3:2020–Q3:2023 Percent, unless otherwise indicated. Level Date Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Real Nominal Nominal dispodispo- UnemCPI 3-month 5-year 10-year BBB Real GDP Mortgage GDP sable sable ployment inflation Treasury Treasury Treasury corporate growth rate growth income income rate rate rate yield yield yield growth growth 24.0 -9.1 2.1 2.1 2.1 2.1 3.6 4.2 4.2 4.2 4.8 4.8 5.0 26.6 -8.5 3.3 3.3 2.8 3.2 4.2 4.7 4.9 5.2 6.0 6.1 6.3 -12.3 -15.7 -10.4 -3.0 -1.5 -1.0 2.4 1.4 1.7 1.9 2.1 2.0 2.0 -10.6 -15.0 -8.9 -1.6 0.0 0.6 4.5 3.4 3.7 3.9 4.2 4.1 4.1 9.5 11.0 11.0 11.0 11.0 11.0 10.8 10.5 10.3 10.0 9.7 9.3 9.0 3.7 1.1 1.8 1.7 1.7 1.7 2.2 2.2 2.2 2.2 2.2 2.2 2.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.3 0.4 0.5 0.6 0.6 0.7 0.9 1.0 1.2 0.3 0.3 0.4 0.4 0.5 0.7 0.8 1.0 1.1 1.3 1.5 1.6 1.8 2.0 5.0 5.5 5.9 6.2 6.4 6.0 5.8 5.5 5.3 5.0 4.7 4.4 Prime rate 2.7 3.7 3.7 3.9 4.0 4.1 4.0 4.0 4.0 4.0 3.9 3.9 3.8 3.3 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 Dow Jones Total Stock Market Index House Price Index 36,530 30,566 26,681 23,647 20,082 18,330 19,415 20,703 22,247 24,065 26,221 28,725 31,632 220 207 198 192 185 177 172 165 161 160 162 164 166 Commercial Market Real Volatility Estate Index Price Index 305 298 291 282 268 255 241 227 218 213 213 214 215 33.6 70.0 64.2 62.6 60.6 57.6 50.2 45.1 41.0 37.4 34.1 31.0 27.9 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. Table A.8. Supervisory alternative severe scenario: International variables, Q3:2020–Q3:2023 Percent, unless otherwise indicated. Date Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Euro area real GDP growth Euro area inflation Euro area bilateral dollar exchange rate (USD/euro) 35.0 -4.4 1.0 1.0 1.0 1.0 1.0 0.6 0.8 1.0 2.0 2.8 3.0 0.3 -0.1 0.0 0.6 0.5 0.7 0.2 -0.4 -1.0 -1.5 -1.6 -1.6 -1.5 1.113 1.101 1.069 1.074 1.080 1.085 1.090 1.102 1.112 1.121 1.129 1.137 1.143 Developing Asia real GDP growth 1.0 -1.0 5.2 9.7 7.8 5.9 3.8 4.0 4.2 4.5 4.7 6.2 7.9 Developing Asia inflation Developing Asia bilateral dollar exchange rate (F/USD, index) Japan real GDP growth 2.5 0.2 -0.2 0.2 -0.3 0.3 -0.4 -0.5 -0.5 -0.5 -0.4 -0.4 -0.4 98.3 99.3 102.3 101.8 101.3 100.8 100.3 100.1 99.9 99.8 99.6 99.5 99.4 20.0 -6.9 1.0 1.0 1.0 1.0 1.0 0.6 0.7 0.7 1.3 1.5 1.7 Japan inflation Japan bilateral dollar exchange rate (yen/USD) U.K. real GDP growth U.K. inflation U.K. bilateral dollar exchange rate (USD/pound) -0.3 -1.3 -1.5 -1.2 -1.0 -0.5 -0.8 -1.1 -1.4 -1.5 -1.5 -1.4 -1.1 107.6 107.3 106.7 106.8 106.9 107.0 107.1 107.1 107.0 107.0 107.0 106.9 106.9 80.0 -4.1 1.0 1.0 1.0 1.0 1.0 0.6 0.8 1.0 2.0 3.0 3.5 0.3 0.4 -0.1 0.5 0.6 0.6 0.5 0.3 0.0 -0.3 -0.4 -0.4 -0.4 1.225 1.212 1.177 1.182 1.188 1.194 1.200 1.215 1.229 1.241 1.253 1.263 1.272 Note: Refer to Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table. 58 December 2020 Stress Test Results Sources for data through 2020:Q2 (as released through September 10, 2020). The 2020:Q2 values of variables marked with an asterisk (*) are projected. U.S. 10-year Treasury yield: Quarterly average of the yield on 10-year U.S. Treasury notes, constructed for the FRB/U.S. model by Federal Reserve staff based on the Svensson smoothed term structure model; see id. U.S. real GDP growth: Percent change in real gross domestic product, chained 2012 dollars, expressed at an annualized rate, Bureau of Economic Analysis (NIPA table 1.1.6, line 1). U.S. BBB corporate yield: Quarterly average of ICE BofAML U.S. Corporate 7-10 Year Yield-toMaturity Index, ICE Data Indices, LLC, used with permission (C4A4 series). U.S. nominal GDP growth: Percent change in gross domestic product (current dollars), expressed at an annualized rate, Bureau of Economic Analysis (NIPA table 1.1.5, line 1). U.S. mortgage rate: Quarterly average of weekly series for the interest rate of a conventional, conforming, 30-year fixed-rate mortgage, obtained from the Primary Mortgage Market Survey of the Federal Home Loan Mortgage Corporation. Notes Regarding Scenario Variables U.S. real disposable income growth: Percent change in disposable personal income (current dollars) divided by the price index for personal consumption expenditures, expressed at an annualized rate, Bureau of Economic Analysis (NIPA table 2.1, line 27, and NIPA table 1.1.4, line 2). U.S. nominal disposable income growth: Percent change in disposable personal income (current dollars), expressed at an annualized rate, Bureau of Economic Analysis (NIPA table 2.1, line 27). U.S. unemployment rate: Quarterly average of seasonally adjusted monthly data for the unemployment rate of the civilian, non-institutional population of age 16 years and older, Bureau of Labor Statistics (series LNS14000000). U.S. CPI inflation: Percent change in the quarterly average of seasonally adjusted monthly data for the all-items CPI for all urban consumers (CPI-U), expressed at an annualized rate, Bureau of Labor Statistics (series CUSR0000SA0). U.S. 3-month Treasury rate: Quarterly average of 3-month Treasury bill secondary market rate on a discount basis, H.15 Release, Selected Interest Rates, Federal Reserve Board (series RIFSGFSM03_N.B). U.S. 5-year Treasury yield: Quarterly average of the yield on 5-year U.S. Treasury notes, constructed for the FRB/U.S. model by Federal Reserve staff based on the Svensson smoothed term structure model; see Lars E. O. Svensson (1995), “Estimating Forward Interest Rates with the Extended Nelson-Siegel Method,” Quarterly Review, no. 3, Sveriges Riksbank, pp. 13–26. U.S. prime rate: Quarterly average of monthly series, H.15 Release (Selected Interest Rates), Federal Reserve Board (series RIFSPBLP_N.M). U.S. Dow Jones Total Stock Market (Float Cap) Index: End-of-quarter value via Bloomberg Finance L.P. *U.S. House Price Index: Price Index for OwnerOccupied Real Estate, Z.1 Release (Financial Accounts of the United States), Federal Reserve Board (series FL075035243.Q divided by 1000). *U.S. Commercial Real Estate Price Index: Commercial Real Estate Price Index, Z.1 Release (Financial Accounts of the United States), Federal Reserve Board (series FL075035503.Q divided by 1000). U.S. Market Volatility Index (VIX): VIX converted to quarterly frequency using the maximum close-ofday value in any quarter, Chicago Board Options Exchange via Bloomberg Finance LP. Euro area real GDP growth: Percent change in real gross domestic product at an annualized rate, staff calculations based on Statistical Office of the European Communities via Haver, extended back using ECB Area Wide Model dataset (ECB Working Paper series no. 42). Euro area inflation: Percent change in the quarterly average of the harmonized index of consumer prices at an annualized rate, staff calculations based on Statistical Office of the European Communities via Haver. 59 Developing Asia real GDP growth: Percent change in real gross domestic product at an annualized rate, staff calculations based on data from Bank of Korea via Haver; National Bureau of Statistics of China via Haver; Indian Central Statistics Office via Haver; Census and Statistics Department of Hong Kong via Haver; and Taiwan Directorate-General of Budget, Accounting and Statistics via Haver. present and percent change in gross domestic expenditure at an annualized rate prior to 1980, Cabinet Office of Japan via Haver. Developing Asia inflation: Percent change in the quarterly average of the consumer price index, or local equivalent, at an annualized rate, staff calculations based on data from National Bureau of Statistics of China via Haver; Indian Ministry of Statistics and Programme Implementation via Haver; Labour Bureau of India via Haver; Statistics Korea (KOSTAT) via Haver; Census and Statistics Department of Hong Kong via Haver; and Taiwan Directorate-General of Budget, Accounting and Statistics via Haver. U.K. real GDP growth: Percent change in gross domestic product at an annualized rate, U.K. Office for National Statistics via Haver. Japan real GDP growth: Percent change in gross domestic product at an annualized rate from 1980 to Japan inflation: Percent change in the quarterly average of the consumer price index at an annualized rate, based on data from the Ministry of Internal Affairs and Communications via Haver. U.K. inflation: Percent change in the quarterly average of the consumer price index at an annualized rate from 1988 to present and percent change in the quarterly average of the retail prices index prior to 1988, staff calculations based on data from the U.K. Office for National Statistics via Haver. Exchange rates: End-of-quarter exchange rates, H.10 Release (Foreign Exchange Rates), Federal Reserve Board. 61 Appendix B: Firm-Specific Results 62 December 2020 Stress Test Results Table B.1.A. Ally Financial Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.4 9.1 11.1 6.9 n/a 7.4 9.1 11.1 6.9 n/a 10.1 11.9 13.8 8.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 8.1 0.2 0.0 2.4 0.3 0.0 5.0 0.2 6.9 1.4 3.8 8.2 5.7 0.0 7.7 14.1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 137.0 135.5 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.7 2.0 8.1 6.9 4.4 3.8 11.3 0.0 6.1 7.0 0.3 0.0 0.0 -3.6 -2.0 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 63 Table B.1.B. Ally Financial Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.3 9.1 11.1 6.8 n/a 7.3 9.1 11.1 6.8 n/a 10.1 11.9 13.8 8.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 7.7 0.2 0.0 2.3 0.3 0.0 4.7 0.2 6.6 1.3 3.7 8.0 5.4 0.0 7.2 14.4 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 137.0 135.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.7 2.0 8.1 6.9 4.4 3.7 11.3 0.0 6.1 7.3 0.3 0.0 0.1 -3.9 -2.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 64 December 2020 Stress Test Results Table B.2.A. American Express Company Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 13.6 14.8 16.5 10.4 n/a Stressed capital ratios1 Ending Minimum 17.0 18.2 19.8 13.1 n/a 13.5 14.8 16.5 10.4 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 15.4 0.0 0.0 5.3 0.0 9.7 0.3 0.0 13.8 0.0 0.0 14.7 0.0 13.3 16.7 5.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 129.3 132.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 18.8 10.0 12.6 74.5 6.7 39.5 68.2 0.0 36.2 12.6 0.0 0.0 0.0 6.2 3.3 0.0 Actual 2020:Q2 -2.9 2022:Q3 -2.9 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 65 Table B.2.B. American Express Company Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 13.6 14.8 16.5 10.4 n/a Stressed capital ratios1 Ending Minimum 17.3 18.5 20.2 13.3 n/a 13.7 15.0 16.6 10.6 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 14.1 0.0 0.0 5.0 0.0 8.7 0.3 0.0 12.6 0.0 0.0 13.8 0.0 11.9 15.8 5.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 129.3 131.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 18.9 10.0 12.7 74.5 6.7 39.5 68.2 0.0 36.2 12.2 0.0 0.0 0.0 6.6 3.5 0.0 Actual 2020:Q2 -2.9 2022:Q3 -2.9 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 66 December 2020 Stress Test Results Table B.3.A. Bank of America Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.6 13.2 15.8 7.4 7.1 Stressed capital ratios1 Ending Minimum 9.5 11.1 13.5 6.2 5.3 9.3 10.9 13.5 6.1 5.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 60.2 4.7 0.9 16.7 12.5 17.6 1.6 6.2 6.1 2.0 2.4 5.8 16.4 20.9 2.1 3.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,475.1 1,456.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 34.4 1.3 94.1 97.1 3.4 3.5 156.9 0.0 5.7 51.8 0.1 11.3 1.6 -30.5 -1.1 1.8 Actual 2020:Q2 -1.5 2022:Q3 0.3 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 67 Table B.3.B. Bank of America Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.6 13.2 15.8 7.4 7.1 Stressed capital ratios1 Ending Minimum 9.2 10.8 13.4 6.0 5.2 9.2 10.8 13.4 6.0 5.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 57.9 4.4 0.9 17.0 11.8 16.0 1.4 6.3 5.8 1.9 2.3 5.9 15.5 19.0 1.9 3.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,475.1 1,458.5 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 32.7 1.2 94.6 95.5 3.5 3.5 157.4 0.0 5.7 53.4 0.1 11.3 2.6 -34.7 -1.3 1.2 Actual 2020:Q2 -1.5 2022:Q3 -0.3 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 68 December 2020 Stress Test Results Table B.4.A. The Bank of New York Mellon Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 14.6 17.4 18.4 7.0 8.3 11.9 14.8 15.9 5.9 7.1 12.7 15.6 16.6 6.2 8.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 1.6 0.1 0.0 0.1 0.4 0.0 0.4 0.6 3.0 1.3 7.5 2.9 9.2 0.0 12.1 1.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 157.3 157.3 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 7.6 1.7 6.3 30.7 1.4 7.0 29.5 0.0 6.7 1.6 0.2 1.4 0.0 4.4 1.0 -0.1 Actual 2020:Q2 -1.9 2022:Q3 -2.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 69 Table B.4.B. The Bank of New York Mellon Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 14.1 16.9 18.0 6.8 8.0 12.2 15.1 16.2 6.0 7.2 12.7 15.6 16.6 6.2 8.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 1.6 0.1 0.0 0.1 0.4 0.0 0.4 0.6 2.9 1.2 7.2 3.0 8.4 0.0 11.4 1.8 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 157.3 157.3 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 7.6 1.7 6.6 30.6 1.5 6.9 29.5 0.0 6.7 1.7 0.2 1.4 0.0 4.3 1.0 -0.8 Actual 2020:Q2 -1.9 2022:Q3 -2.7 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 70 December 2020 Stress Test Results Table B.5.A. Barclays US LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 15.5 18.7 21.9 8.7 7.6 14.7 18.0 21.3 8.2 7.2 17.3 20.4 23.4 9.5 9.1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.0 0.0 0.0 0.0 0.0 4.8 0.1 0.1 13.8 0.0 0.0 22.8 12.6 22.4 16.7 0.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 83.3 82.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 4.7 3.2 5.9 13.7 4.0 9.2 14.9 0.0 10.1 4.3 0.0 1.0 0.0 -0.6 -0.4 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 71 Table B.5.B. Barclays US LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 15.7 18.9 22.2 8.7 7.7 15.2 18.4 21.7 8.5 7.5 17.3 20.4 23.4 9.5 9.1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 4.6 0.0 0.0 0.0 0.0 4.4 0.0 0.1 12.6 0.0 0.0 21.5 11.7 20.4 15.8 0.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 83.3 82.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 4.6 3.1 5.9 13.6 4.0 9.2 14.9 0.0 10.1 4.1 0.0 1.0 0.0 -0.5 -0.3 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 72 December 2020 Stress Test Results Table B.6.A. BMO Financial Corp. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.0 7.5 10.0 5.0 n/a 7.0 7.5 10.0 5.0 n/a 12.1 12.6 15.1 8.5 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 6.5 0.2 0.1 3.0 1.7 0.1 0.3 1.2 7.6 1.9 3.7 8.0 15.1 21.2 4.8 6.0 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 125.3 124.5 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 0.8 0.4 7.9 3.3 4.2 1.8 10.4 0.0 5.6 6.6 0.0 0.0 0.0 -5.8 -3.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 73 Table B.6.B. BMO Financial Corp. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 6.5 7.0 9.8 4.7 n/a 6.5 7.0 9.8 4.7 n/a 12.1 12.6 15.1 8.5 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 6.4 0.1 0.1 3.0 1.6 0.1 0.3 1.2 7.5 1.8 3.5 8.0 14.3 19.4 4.5 6.2 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 125.3 124.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 0.7 0.4 8.0 3.2 4.3 1.7 10.4 0.0 5.6 7.2 0.0 0.0 0.0 -6.5 -3.5 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 74 December 2020 Stress Test Results Table B.7.A. BNP Paribas USA, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 11.5 11.5 13.8 6.2 n/a 11.5 11.5 13.8 6.2 n/a 15.8 15.8 18.2 8.6 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.0 0.2 0.1 1.5 1.7 0.1 1.1 0.4 7.6 2.3 3.4 10.3 11.1 23.7 7.6 3.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 89.7 89.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.1 0.8 5.6 3.7 3.9 2.6 8.2 0.0 5.8 5.0 0.0 0.0 0.0 -3.9 -2.8 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 75 Table B.7.B. BNP Paribas USA, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 11.1 11.1 13.8 6.0 n/a 11.1 11.1 13.8 6.0 n/a 15.8 15.8 18.2 8.6 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 4.8 0.2 0.1 1.5 1.6 0.1 1.0 0.4 7.3 2.2 3.2 10.2 10.6 21.7 6.8 3.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 89.7 88.8 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.0 0.7 5.6 3.7 4.0 2.6 8.3 0.0 5.8 5.3 0.0 0.0 0.0 -4.3 -3.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 76 December 2020 Stress Test Results Table B.8.A. Capital One Financial Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 12.4 14.2 16.7 10.3 9.7 Stressed capital ratios1 Ending Minimum 7.2 8.9 11.5 6.6 5.5 7.1 8.9 11.4 6.6 5.5 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 42.6 0.0 0.0 4.7 2.1 27.5 7.2 1.1 17.0 2.5 6.9 13.0 6.6 27.7 11.4 5.4 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 290.2 294.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 23.1 5.5 48.5 12.7 11.5 3.0 38.0 0.0 9.0 35.8 0.0 0.0 0.1 -12.8 -3.0 0.0 Actual 2020:Q2 -0.1 2022:Q3 -0.1 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 77 Table B.8.B. Capital One Financial Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 12.4 14.2 16.7 10.3 9.7 Stressed capital ratios1 Ending Minimum 7.4 9.2 11.8 6.8 5.7 7.4 9.2 11.8 6.8 5.7 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 39.7 0.0 0.0 4.6 1.9 25.2 6.8 1.1 15.9 2.4 6.6 12.9 6.0 25.4 10.8 5.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 290.2 293.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 23.1 5.5 48.6 12.6 11.5 3.0 38.1 0.0 9.0 34.9 0.0 0.0 0.2 -12.0 -2.8 0.0 Actual 2020:Q2 -0.1 2022:Q3 -0.1 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 78 December 2020 Stress Test Results Table B.9.A. Citigroup Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.8 13.3 16.5 7.1 6.7 Stressed capital ratios1 Ending Minimum 10.9 12.5 15.5 6.6 5.3 9.6 11.1 14.5 5.8 4.7 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 55.9 1.9 0.8 10.3 2.8 30.6 2.4 7.2 8.2 2.3 7.4 5.7 11.7 21.4 8.2 3.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,187.3 1,178.6 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 49.4 2.2 104.8 63.9 4.7 2.9 119.3 0.0 5.3 40.0 0.5 10.3 1.2 -2.7 1.1 Actual 2020:Q2 -35.4 -0.1 2022:Q3 -34.4 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 79 Table B.9.B. Citigroup Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.8 13.3 16.5 7.1 6.7 Stressed capital ratios1 Ending Minimum 10.6 12.2 15.5 6.5 5.2 9.8 11.4 14.8 6.0 4.8 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 52.7 1.7 0.7 10.5 2.6 28.0 2.1 7.2 7.7 2.1 7.0 5.7 10.8 19.6 7.2 3.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,187.3 1,178.4 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 48.2 2.2 105.7 62.2 4.7 2.8 119.7 0.0 5.4 40.2 0.5 10.3 1.8 -4.6 0.0 Actual 2020:Q2 -35.4 -0.2 2022:Q3 -35.5 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 80 December 2020 Stress Test Results Table B.10.A. Citizens Financial Group, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 6.3 7.7 9.9 6.5 n/a 6.3 7.7 9.9 6.5 n/a 9.6 10.9 13.1 9.3 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 8.6 0.5 0.5 2.4 2.7 0.4 1.7 0.4 7.0 2.3 4.2 6.3 15.5 25.1 6.4 6.2 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 147.3 146.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.7 2.0 9.7 4.1 5.4 2.3 10.1 0.0 5.6 8.2 0.0 0.0 0.0 -4.6 -2.5 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 81 Table B.10.B. Citizens Financial Group, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 6.2 7.5 9.7 6.3 n/a 6.2 7.5 9.7 6.3 n/a 9.6 10.9 13.1 9.3 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 8.3 0.4 0.5 2.4 2.5 0.4 1.6 0.4 6.8 2.2 4.1 6.3 14.5 22.6 6.1 6.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 147.3 145.4 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.7 2.0 9.7 4.1 5.4 2.3 10.1 0.0 5.6 8.6 0.0 0.0 0.1 -5.0 -2.8 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 82 December 2020 Stress Test Results Table B.11.A. Credit Suisse Holdings (USA), Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 17.8 18.5 18.5 11.2 10.1 16.9 17.6 17.8 10.6 9.5 21.4 22.0 22.1 14.0 12.6 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Item Risk-weighted assets1 1 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 0.2 0.0 0.0 0.0 0.1 0.0 0.0 0.1 1.7 0.0 0.0 0.0 52.2 0.0 16.7 0.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Projected 2022:Q3 79.0 74.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. The risk-weighted assets are sourced from the FR Y-14A reports filed by firms in November. In mid-December, Credit Suisse revised its risk-weighted assets reported in the FR Y-9C as of June 30, 2020 to $79.3 billion. The revised risk-weighted assets reported in mid-December would result in risk-based capital ratios that are approximately 5 to 7 basis points lower. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Actual 2020:Q2 Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.1 0.9 -0.9 13.4 -0.8 11.0 11.3 0.0 9.3 0.2 0.0 2.6 0.2 -1.8 -1.5 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 83 Table B.11.B. Credit Suisse Holdings (USA), Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 17.7 18.3 18.4 11.1 10.0 17.1 17.7 17.8 10.7 9.6 21.4 22.0 22.1 14.0 12.6 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Item Risk-weighted assets1 1 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 0.2 0.0 0.0 0.0 0.1 0.0 0.0 0.1 1.6 0.0 0.0 0.0 45.2 0.0 15.8 0.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Projected 2022:Q3 79.0 74.1 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. The risk-weighted assets are sourced from the FR Y-14A reports filed by firms in November. In mid-December, Credit Suisse revised its risk-weighted assets reported in the FR Y-9C as of June 30, 2020 to $79.3 billion. The revised risk-weighted assets reported in mid-December would result in risk-based capital ratios that are approximately 5 to 7 basis points lower. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Actual 2020:Q2 Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.0 0.8 -0.9 13.3 -0.8 10.9 11.3 0.0 9.3 0.1 0.0 2.6 0.2 -1.9 -1.6 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 84 December 2020 Stress Test Results Table B.12.A. DB USA Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 2 Actual 2020:Q2 Stressed capital ratios1 2 Ending Minimum 19.8 34.3 34.6 7.3 6.6 19.8 34.3 34.6 7.3 6.6 31.5 44.7 44.8 10.4 12.0 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. DWS USA Corporation, the second U.S. intermediate holding company subsidiary of Deutsche Bank AG, was subject to December 2020 Stress Test and maintained capital above each minimum regulatory capital ratio on a post-stress basis. DWS USA Corporation had about $2 billion in assets as of the end of second quarter of 2020. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 0.9 0.1 0.0 0.0 0.7 0.0 0.0 0.1 7.0 2.5 6.0 1.2 16.5 0.0 8.0 2.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 32.0 29.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 -0.7 -0.6 0.8 10.0 0.7 8.7 11.5 0.0 10.0 0.9 0.0 0.9 0.0 -2.5 -2.2 0.0 Actual 2020:Q2 -0.2 2022:Q3 -0.2 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 85 Table B.12.B. DB USA Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 2 Actual 2020:Q2 Stressed capital ratios1 2 Ending Minimum 19.5 34.0 34.5 7.3 6.6 19.5 34.0 34.5 7.3 6.6 31.5 44.7 44.8 10.4 12.0 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. DWS USA Corporation, the second U.S. intermediate holding company subsidiary of Deutsche Bank AG, was subject to December 2020 Stress Test and maintained capital above each minimum regulatory capital ratio on a post-stress basis. DWS USA Corporation had about $2 billion in assets as of the end of second quarter of 2020. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 0.8 0.1 0.0 0.0 0.6 0.0 0.0 0.1 6.8 2.4 5.9 1.2 15.9 0.0 7.5 2.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 32.0 29.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 -0.7 -0.6 0.8 9.9 0.7 8.6 11.5 0.0 10.0 0.9 0.0 0.9 0.0 -2.6 -2.3 0.0 Actual 2020:Q2 -0.2 2022:Q3 -0.2 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 86 December 2020 Stress Test Results Table B.13.A. Discover Financial Services Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 11.7 12.9 14.7 10.0 n/a Stressed capital ratios1 Ending Minimum 9.0 10.2 12.0 8.1 n/a 8.3 9.4 11.4 7.3 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 18.9 0.0 0.1 0.0 0.0 17.1 1.6 0.0 21.3 2.5 9.9 27.0 22.3 24.4 9.6 5.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 90.7 90.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 13.6 12.0 20.1 3.8 17.7 3.3 10.3 0.0 9.0 15.1 0.0 0.0 0.0 -1.5 -1.3 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 87 Table B.13.B. Discover Financial Services Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 11.7 12.9 14.7 10.0 n/a Stressed capital ratios1 Ending Minimum 10.1 11.2 13.1 8.9 n/a 9.6 10.8 12.7 8.5 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 17.4 0.0 0.1 0.0 0.0 15.6 1.6 0.0 19.5 2.4 9.5 25.7 20.2 22.3 9.1 5.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 90.7 89.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 13.6 12.0 20.2 3.8 17.7 3.3 10.3 0.0 9.1 14.3 0.0 0.0 0.0 -0.7 -0.6 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 88 December 2020 Stress Test Results Table B.14.A. Fifth Third Bancorp Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.6 8.9 12.1 6.6 n/a 7.5 8.8 12.1 6.5 n/a 9.7 11.0 14.2 8.2 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 9.3 0.4 0.2 3.5 3.3 0.6 0.8 0.4 8.4 2.7 3.8 7.7 20.9 29.3 5.1 4.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 143.3 142.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 5.7 2.8 10.0 8.5 4.9 4.2 12.8 0.0 6.3 8.2 0.0 0.0 0.0 -2.6 -1.3 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 89 Table B.14.B. Fifth Third Bancorp Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.5 8.7 12.0 6.5 n/a 7.5 8.7 12.0 6.5 n/a 9.7 11.0 14.2 8.2 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 9.0 0.4 0.2 3.5 3.1 0.6 0.7 0.4 8.2 2.5 3.7 7.8 19.7 26.3 4.7 4.4 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 143.3 142.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 5.7 2.8 10.1 8.4 5.0 4.2 12.8 0.0 6.3 8.7 0.0 0.0 0.0 -3.0 -1.5 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 90 December 2020 Stress Test Results Table B.15.A. The Goldman Sachs Group, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 13.3 15.2 18.1 7.6 6.6 Stressed capital ratios1 Ending Minimum 9.8 11.8 14.6 5.8 4.4 8.5 10.5 13.6 5.1 3.8 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 13.5 0.0 0.0 4.7 3.3 0.6 0.9 4.1 10.1 2.5 4.0 12.6 44.8 23.7 11.1 5.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 563.1 553.3 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 17.4 1.5 10.0 77.6 0.9 6.8 70.2 0.0 6.2 11.8 0.0 20.6 3.8 -18.8 -1.6 0.0 Actual 2020:Q2 -0.3 2022:Q3 -0.4 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 91 Table B.15.B. The Goldman Sachs Group, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 13.3 15.2 18.1 7.6 6.6 Stressed capital ratios1 Ending Minimum 9.2 11.2 14.1 5.5 4.1 8.3 10.3 13.5 5.1 3.8 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 13.4 0.0 0.0 4.8 3.1 0.5 0.8 4.2 10.0 2.4 3.8 12.8 42.6 21.7 10.5 5.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 563.1 553.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 16.0 1.4 10.0 76.4 0.9 6.7 70.4 0.0 6.2 12.7 0.0 20.6 4.9 -22.2 -1.9 -0.2 Actual 2020:Q2 -0.3 2022:Q3 -0.5 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 92 December 2020 Stress Test Results Table B.16.A. HSBC North America Holdings Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 5.5 7.3 11.8 3.2 2.5 5.5 7.3 11.8 3.2 2.5 13.6 15.4 19.9 6.9 6.4 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 7.4 0.5 0.1 2.0 3.7 0.4 0.0 0.6 10.6 3.0 8.1 6.7 33.1 35.8 11.2 7.3 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 127.2 121.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 -0.4 -0.1 5.3 5.7 1.9 2.0 11.3 0.0 4.0 7.2 0.1 1.2 0.0 -8.8 -3.1 0.0 Actual 2020:Q2 0.1 2022:Q3 0.1 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 93 Table B.16.B. HSBC North America Holdings Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 5.1 7.0 11.8 3.0 2.4 5.1 7.0 11.8 3.0 2.4 13.6 15.4 19.9 6.9 6.4 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 7.2 0.5 0.1 2.0 3.6 0.4 0.0 0.6 10.4 2.9 7.9 6.8 31.9 33.0 10.7 7.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 127.2 121.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 -0.4 -0.1 5.3 5.6 1.9 2.0 11.3 0.0 4.0 7.6 0.1 1.2 0.0 -9.2 -3.3 0.0 Actual 2020:Q2 0.1 2022:Q3 0.1 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 94 December 2020 Stress Test Results Table B.17.A. Huntington Bancshares Incorporated Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 8.2 10.1 11.9 7.6 n/a 8.0 10.0 11.9 7.5 n/a 9.8 11.8 13.8 8.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.0 0.5 0.2 1.5 1.6 0.1 0.8 0.2 6.8 3.8 3.1 7.2 16.4 23.7 4.8 3.8 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 87.3 87.1 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.1 2.6 6.8 3.4 5.8 2.8 7.1 0.0 6.0 4.1 0.0 0.0 0.0 -1.1 -0.9 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 95 Table B.17.B. Huntington Bancshares Incorporated Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 8.1 10.0 12.1 7.5 n/a 8.1 10.0 12.1 7.5 n/a 9.8 11.8 13.8 8.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 4.8 0.5 0.2 1.5 1.6 0.1 0.8 0.2 6.5 3.6 3.0 7.3 15.6 21.7 4.4 3.9 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 87.3 87.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.2 2.7 6.9 3.4 5.8 2.8 7.1 0.0 6.0 4.3 0.0 0.0 0.1 -1.2 -1.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 96 December 2020 Stress Test Results Table B.18.A. JPMorgan Chase & Co. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 12.4 14.3 16.7 6.9 6.8 Stressed capital ratios1 Ending Minimum 10.8 12.7 14.8 6.1 5.0 10.0 11.9 14.4 5.7 4.7 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 70.1 4.3 0.6 18.6 5.0 28.3 2.3 11.0 7.3 2.1 2.2 10.3 4.2 22.3 3.8 4.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,541.4 1,527.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 59.9 1.9 116.2 138.6 3.6 4.3 194.9 0.0 6.1 52.1 0.8 23.2 2.5 -18.8 -0.6 -0.2 Actual 2020:Q2 6.0 2022:Q3 5.9 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 97 Table B.18.B. JPMorgan Chase & Co. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 12.4 14.3 16.7 6.9 6.8 Stressed capital ratios1 Ending Minimum 10.3 12.3 14.7 5.9 4.8 10.0 11.9 14.4 5.7 4.7 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 67.1 4.1 0.6 18.7 4.7 25.7 2.2 11.2 7.0 1.9 2.0 10.3 3.9 20.2 3.6 4.8 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,541.4 1,527.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 57.7 1.8 117.1 136.1 3.6 4.2 195.6 0.0 6.1 53.5 0.7 23.2 3.9 -23.6 -0.7 -3.1 Actual 2020:Q2 6.0 2022:Q3 2.9 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 98 December 2020 Stress Test Results Table B.19.A. KeyCorp Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 8.0 9.4 11.3 7.9 n/a 7.7 9.1 11.3 7.7 n/a 9.1 10.5 12.8 8.8 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.8 0.3 0.3 2.2 1.8 0.2 0.5 0.5 5.9 2.9 3.9 5.9 11.6 23.7 5.0 2.9 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 136.3 135.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 4.0 2.3 8.8 6.1 5.1 3.6 10.9 0.0 6.3 5.0 0.0 0.0 0.1 -1.0 -0.6 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 99 Table B.19.B. KeyCorp Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.7 9.1 11.3 7.6 n/a 7.7 9.0 11.3 7.6 n/a 9.1 10.5 12.8 8.8 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.7 0.3 0.2 2.3 1.6 0.2 0.5 0.5 5.7 2.7 3.8 6.0 10.8 21.7 4.7 3.0 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 136.3 135.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 4.0 2.3 8.8 6.1 5.1 3.5 10.9 0.0 6.3 5.2 0.0 0.0 0.3 -1.5 -0.9 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 100 December 2020 Stress Test Results Table B.20.A. M&T Bank Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 5.0 6.2 8.5 4.9 n/a 5.0 6.2 8.5 4.9 n/a 9.5 10.7 13.0 8.6 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 9.2 0.5 0.2 1.3 6.0 0.1 0.8 0.3 10.1 3.4 3.6 7.3 16.3 23.7 7.4 5.0 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 105.6 104.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 4.3 3.1 8.0 4.6 5.7 3.3 8.3 0.0 5.9 8.9 0.0 0.0 0.0 -4.6 -3.3 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 101 Table B.20.B. M&T Bank Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 4.8 6.0 8.4 4.8 n/a 4.8 6.0 8.4 4.8 n/a 9.5 10.7 13.0 8.6 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 8.8 0.5 0.1 1.3 5.7 0.1 0.7 0.3 9.7 3.3 3.5 7.3 15.5 21.7 6.7 5.1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 105.6 104.5 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 4.3 3.1 8.1 4.6 5.8 3.3 8.3 0.0 6.0 9.1 0.0 0.0 0.1 -4.9 -3.5 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 102 December 2020 Stress Test Results Table B.21.A. Morgan Stanley Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 13.1 15.2 17.7 6.5 5.1 12.4 14.5 17.1 6.2 4.9 16.5 18.6 21.0 8.1 7.3 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 7.2 0.5 0.0 1.2 2.3 0.0 0.2 3.0 4.4 1.7 4.0 8.4 18.3 0.0 0.9 3.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 415.5 407.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 6.1 0.6 10.4 76.9 1.1 7.9 81.2 0.0 8.3 7.6 0.1 10.1 3.3 -14.9 -1.5 0.7 Actual 2020:Q2 0.0 2022:Q3 0.7 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 103 Table B.21.B. Morgan Stanley Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 12.3 14.4 17.0 6.2 4.9 11.9 14.1 16.8 6.0 4.7 16.5 18.6 21.0 8.1 7.3 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 7.1 0.5 0.0 1.2 2.1 0.0 0.2 3.0 4.4 1.6 3.8 8.6 16.8 0.0 0.9 3.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 415.5 408.1 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 5.1 0.5 10.5 76.0 1.1 7.8 81.3 0.0 8.3 8.0 0.1 10.1 4.8 -17.8 -1.8 0.4 Actual 2020:Q2 0.0 2022:Q3 0.4 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 104 December 2020 Stress Test Results Table B.22.A. MUFG Americas Holdings Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 10.9 10.9 12.0 6.7 n/a 10.9 10.9 12.0 6.7 n/a 14.5 14.5 15.6 8.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.4 0.9 0.1 1.7 1.5 0.1 0.6 0.5 6.4 2.9 3.6 10.2 8.1 23.7 17.0 4.4 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 103.8 102.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.4 0.8 7.0 5.2 4.2 3.1 10.8 0.0 6.5 5.1 0.1 0.0 0.1 -3.8 -2.2 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 105 Table B.22.B. MUFG Americas Holdings Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 10.7 10.7 12.0 6.5 n/a 10.7 10.7 12.0 6.5 n/a 14.5 14.5 15.6 8.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.2 0.9 0.1 1.7 1.4 0.1 0.6 0.5 6.2 2.7 3.3 10.4 7.4 21.7 16.1 4.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 103.8 102.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.3 0.8 7.1 5.1 4.2 3.0 10.8 0.0 6.5 5.3 0.1 0.0 0.1 -4.1 -2.4 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 106 December 2020 Stress Test Results Table B.23.A. Northern Trust Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 13.2 14.3 16.5 7.5 8.6 12.6 13.8 16.3 7.2 8.3 13.4 14.6 16.5 7.6 9.0 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 2.0 0.1 0.0 0.3 0.4 0.0 0.0 1.2 5.9 1.2 7.9 6.3 8.7 0.0 16.7 6.4 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 72.4 72.4 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 2.0 1.3 2.5 10.2 1.7 6.7 10.7 0.0 7.1 2.2 0.1 0.0 0.0 -0.3 -0.2 0.2 Actual 2020:Q2 0.4 2022:Q3 0.6 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 107 Table B.23.B. Northern Trust Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 12.8 13.9 16.3 7.3 8.3 12.6 13.8 16.3 7.3 8.2 13.4 14.6 16.5 7.6 9.0 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 2.0 0.1 0.0 0.3 0.3 0.0 0.0 1.2 5.9 1.0 7.6 6.4 7.9 0.0 15.8 6.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 72.4 72.6 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 2.1 1.4 2.7 10.2 1.8 6.7 10.7 0.0 7.1 2.3 0.1 0.0 0.0 -0.3 -0.2 0.0 Actual 2020:Q2 0.4 2022:Q3 0.3 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 108 December 2020 Stress Test Results Table B.24.A. The PNC Financial Services Group, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.3 12.4 14.9 9.4 9.3 Stressed capital ratios1 Ending Minimum 9.8 11.0 13.0 8.3 7.1 9.6 10.8 13.0 8.1 6.9 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 15.8 0.5 0.3 6.7 4.8 1.5 1.0 1.2 6.5 1.5 1.9 7.1 13.3 26.2 4.0 3.1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 337.0 336.3 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 9.3 2.0 22.9 15.1 5.0 3.3 28.6 0.0 6.2 12.6 0.1 0.0 0.4 -3.8 -0.8 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 109 Table B.24.B. The PNC Financial Services Group, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.3 12.4 14.9 9.4 9.3 Stressed capital ratios1 Ending Minimum 9.6 10.8 13.2 8.2 6.9 9.6 10.8 13.2 8.1 6.9 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 15.4 0.4 0.3 6.7 4.5 1.4 0.9 1.2 6.3 1.4 1.8 7.1 12.4 23.8 3.8 3.1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 337.0 336.4 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 9.3 2.0 23.1 14.9 5.0 3.2 28.7 0.0 6.2 13.4 0.1 0.0 0.4 -4.7 -1.0 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 110 December 2020 Stress Test Results Table B.25.A. RBC US Group Holdings LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 12.7 12.7 13.8 7.7 n/a 12.6 12.6 13.8 7.6 n/a 16.1 16.1 16.8 9.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 3.9 0.5 0.0 0.9 1.6 0.0 0.2 0.7 6.8 3.1 3.5 11.0 11.3 23.7 13.8 3.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 83.3 81.8 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.9 1.3 5.3 11.0 3.8 7.7 14.4 0.0 10.2 4.2 0.2 0.0 0.0 -2.6 -1.8 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 111 Table B.25.B. RBC US Group Holdings LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 12.4 12.4 13.7 7.5 n/a 12.4 12.4 13.7 7.5 n/a 16.1 16.1 16.8 9.9 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 3.8 0.4 0.0 0.9 1.5 0.0 0.2 0.7 6.5 3.0 3.3 11.2 10.2 21.7 12.9 3.8 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 83.3 81.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 1.8 1.3 5.4 10.9 3.8 7.7 14.4 0.0 10.2 4.4 0.3 0.0 0.0 -2.9 -2.0 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 112 December 2020 Stress Test Results Table B.26.A. Regions Financial Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.2 8.7 10.8 7.1 n/a 7.1 8.6 10.8 7.0 n/a 8.9 10.4 12.6 8.4 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 6.0 0.5 0.2 2.0 1.8 0.2 0.7 0.5 6.9 2.7 4.3 7.8 12.9 19.3 12.9 3.0 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 109.5 109.3 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.6 2.5 7.9 5.1 5.4 3.5 9.4 0.0 6.5 5.0 0.0 0.0 0.0 -1.4 -1.0 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 113 Table B.26.B. Regions Financial Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 7.0 8.5 10.7 6.9 n/a 7.0 8.5 10.7 6.9 n/a 8.9 10.4 12.6 8.4 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 5.8 0.5 0.2 2.1 1.7 0.2 0.7 0.5 6.8 2.6 4.2 7.9 12.0 17.7 12.2 3.1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 109.5 109.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.6 2.5 7.9 5.1 5.5 3.5 9.4 0.0 6.5 5.3 0.0 0.0 0.0 -1.7 -1.2 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 114 December 2020 Stress Test Results Table B.27.A. Santander Holdings USA, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 15.5 16.9 18.3 13.5 n/a 14.4 15.8 17.3 12.3 n/a 14.3 15.7 17.1 12.4 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 9.0 0.2 0.2 0.8 1.1 0.1 6.4 0.2 10.0 2.9 3.8 5.1 7.2 23.7 16.8 2.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 119.9 119.3 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 7.2 4.7 14.0 8.4 9.2 5.5 15.3 0.0 10.0 4.5 0.0 0.0 0.4 2.3 1.5 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 115 Table B.27.B. Santander Holdings USA, Inc. Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 15.6 16.9 18.3 13.5 n/a 14.8 16.2 17.6 12.6 n/a 14.3 15.7 17.1 12.4 n/a 1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. n/a Not applicable. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 8.5 0.2 0.2 0.8 1.0 0.1 6.1 0.2 9.5 2.7 3.7 5.0 6.6 21.7 15.9 2.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 119.9 118.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 7.2 4.7 14.1 8.4 9.2 5.5 15.3 0.0 10.0 4.5 0.0 0.0 0.5 2.2 1.4 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 116 December 2020 Stress Test Results Table B.28.A. State Street Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 13.3 15.6 16.8 6.5 8.2 11.4 13.7 14.9 5.7 7.2 12.3 14.6 15.7 6.1 8.3 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 1.3 0.0 0.0 0.3 0.1 0.0 0.0 0.9 4.9 0.0 0.0 6.6 6.1 0.0 0.6 4.5 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 106.8 106.7 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 3.9 1.4 4.1 21.6 1.4 7.7 21.7 0.0 7.8 1.5 0.1 1.0 0.0 1.3 0.5 0.0 Actual 2020:Q2 -0.5 2022:Q3 -0.6 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 117 Table B.28.B. State Street Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 12.9 15.2 16.4 6.3 8.0 11.5 13.8 15.1 5.8 7.3 12.3 14.6 15.7 6.1 8.3 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 1.3 0.0 0.0 0.3 0.1 0.0 0.0 0.9 5.0 0.0 0.0 6.8 5.8 0.0 0.6 4.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 106.8 106.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 4.0 1.4 4.3 21.5 1.5 7.7 21.8 0.0 7.8 1.6 0.1 1.0 0.0 1.3 0.4 -0.4 Actual 2020:Q2 -0.5 2022:Q3 -0.9 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 118 December 2020 Stress Test Results Table B.29.A. TD Group US Holdings LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 16.3 16.3 17.5 8.5 9.4 Stressed capital ratios1 Ending Minimum 16.0 16.0 16.8 8.4 7.5 15.4 15.4 16.7 8.1 7.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 11.2 0.6 0.3 2.3 2.4 3.8 0.9 0.9 6.6 2.1 4.0 6.5 8.2 30.1 3.4 3.1 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 232.5 234.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 9.7 2.0 21.3 8.0 4.5 1.7 19.6 0.0 4.1 9.7 0.2 0.0 0.0 -0.2 0.0 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 119 Table B.29.B. TD Group US Holdings LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 16.3 16.3 17.5 8.5 9.4 Stressed capital ratios1 Ending Minimum 16.0 16.0 17.1 8.4 7.5 15.6 15.6 16.8 8.2 7.3 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 10.7 0.6 0.3 2.3 2.2 3.5 0.8 0.9 6.3 2.0 3.9 6.6 7.7 27.6 3.2 3.2 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 232.5 234.5 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 9.8 2.1 21.6 7.8 4.5 1.6 19.7 0.0 4.1 9.9 0.2 0.0 0.0 -0.3 -0.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 120 December 2020 Stress Test Results Table B.30.A. Truist Financial Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 9.7 11.6 14.0 9.0 8.5 Stressed capital ratios1 Ending Minimum 7.9 9.8 12.5 7.7 6.7 7.8 9.7 12.5 7.6 6.6 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 19.2 1.0 0.4 4.4 7.0 0.7 3.9 1.7 6.3 2.0 2.7 6.1 11.8 19.0 7.1 3.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 382.8 381.2 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 12.2 2.4 27.5 19.8 5.5 3.9 35.1 0.0 7.0 17.3 0.1 0.0 0.2 -5.5 -1.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 121 Table B.30.B. Truist Financial Corporation Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 9.7 11.6 14.0 9.0 8.5 Stressed capital ratios1 Ending Minimum 7.7 9.6 12.5 7.5 6.6 7.7 9.6 12.5 7.5 6.6 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 18.4 1.0 0.4 4.4 6.6 0.6 3.7 1.8 6.1 1.9 2.6 6.1 11.2 17.5 6.7 3.8 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 382.8 380.6 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 12.1 2.4 27.6 19.6 5.5 3.9 35.2 0.0 7.0 18.2 0.1 0.0 0.4 -6.6 -1.3 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 122 December 2020 Stress Test Results Table B.31.A. UBS Americas Holding LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 17.8 23.1 24.8 9.2 7.8 16.7 22.1 23.6 8.7 7.4 21.0 25.8 27.0 11.3 11.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 1.1 0.4 0.0 0.1 0.0 0.0 0.2 0.3 2.0 2.0 0.0 2.4 2.0 23.7 0.9 6.9 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 64.4 56.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 2.5 1.5 4.1 26.0 2.5 16.1 27.6 0.0 17.1 1.3 0.0 1.2 0.1 -0.1 -0.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 123 Table B.31.B. UBS Americas Holding LLC Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 Stressed capital ratios1 Ending Minimum 17.6 22.9 24.8 9.1 7.8 16.7 22.1 23.6 8.7 7.5 21.0 25.8 27.0 11.3 11.2 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 1.0 0.3 0.0 0.1 0.0 0.0 0.2 0.3 1.9 1.9 0.0 2.5 1.8 21.7 0.9 6.9 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 64.4 56.9 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 2.4 1.5 4.1 26.0 2.5 16.0 27.6 0.0 17.1 1.3 0.0 1.2 0.1 -0.2 -0.1 0.0 Actual 2020:Q2 0.0 2022:Q3 0.0 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 124 December 2020 Stress Test Results Table B.32.A. U.S. Bancorp Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 9.0 10.6 12.8 8.0 7.1 Stressed capital ratios1 Ending Minimum 8.0 9.6 11.5 7.2 5.8 7.6 9.2 11.4 6.9 5.6 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 23.1 1.3 0.6 6.7 6.6 5.0 1.7 1.3 7.6 1.9 4.0 7.5 17.3 23.7 3.9 4.6 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 401.8 399.6 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 16.7 3.1 27.0 23.7 4.9 4.3 34.0 0.0 6.2 19.8 0.0 0.0 0.0 -3.1 -0.6 0.0 Actual 2020:Q2 -0.1 2022:Q3 -0.1 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 125 Table B.32.B. U.S. Bancorp Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 9.0 10.6 12.8 8.0 7.1 Stressed capital ratios1 Ending Minimum 7.9 9.5 11.7 7.2 5.8 7.8 9.4 11.6 7.1 5.7 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 22.1 1.3 0.5 6.6 6.3 4.6 1.5 1.3 7.3 1.8 3.9 7.5 16.3 21.7 3.5 4.7 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 401.8 400.0 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 16.8 3.1 27.3 23.6 5.0 4.3 34.1 0.0 6.2 20.4 0.0 0.0 0.0 -3.6 -0.7 0.0 Actual 2020:Q2 -0.1 2022:Q3 -0.1 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 126 December 2020 Stress Test Results Table B.33.A. Wells Fargo & Company Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.0 12.6 15.9 8.0 7.5 Stressed capital ratios1 Ending Minimum 8.7 10.4 13.4 6.5 5.3 8.3 9.9 13.3 6.2 5.1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 59.9 4.9 0.7 13.1 19.1 8.2 3.9 10.0 6.5 1.8 2.0 7.2 14.9 22.8 5.4 5.0 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,213.1 1,204.5 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 39.4 2.0 99.5 76.3 5.1 3.9 136.5 0.0 6.9 52.0 0.6 10.4 1.6 -25.2 -1.3 1.7 Actual 2020:Q2 -0.6 2022:Q3 1.2 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 127 Table B.33.B. Wells Fargo & Company Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3 Percent Billions of dollars Regulatory ratio Common equity tier 1 capital ratio Tier 1 capital ratio Total capital ratio Tier 1 leverage ratio Supplementary leverage ratio 1 Actual 2020:Q2 11.0 12.6 15.9 8.0 7.5 Stressed capital ratios1 Ending Minimum 8.4 10.0 13.4 6.3 5.2 8.3 9.9 13.3 6.2 5.1 The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Projected loan losses, by type of loan, 2020:Q3–2022:Q3 Loan type Loan losses First-lien mortgages, domestic Junior liens and HELOCs, domestic Commercial and industrial2 Commercial real estate, domestic Credit cards Other consumer3 Other loans4 1 2 3 4 Billions of dollars Portfolio loss rates (percent)1 57.8 4.7 0.7 13.2 17.9 7.5 3.7 10.0 6.3 1.8 1.9 7.3 14.0 21.0 5.1 5.0 Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Other consumer loans include student loans and automobile loans. Other loans include international real estate loans. Item Risk-weighted assets1 1 Actual 2020:Q2 Projected 2022:Q3 1,213.1 1,204.5 For each quarter, risk-weighted assets are calculated under the Board’s standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Projected losses, revenue, and net income before taxes through 2022:Q3 Item Pre-provision net revenue equals Net interest income Noninterest income less Noninterest expense2 Other revenue3 less Provisions for loan and lease losses Credit losses on investment securities (AFS/HTM)4 Trading and counterparty losses5 Other losses/gains6 equals Net income before taxes Memo items Other comprehensive income7 Other effects on capital AOCI included in capital (billions of dollars) 1 2 3 4 5 6 7 Billions of dollars Percent of average assets1 38.9 2.0 100.2 75.5 5.1 3.8 136.8 0.0 6.9 54.2 0.6 10.4 1.8 -28.1 -1.4 -0.1 Actual 2020:Q2 -0.6 2022:Q3 -0.7 Average assets is the nine-quarter average of total assets. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. 129 Appendix C: Additional Aggregate Results Figure C.1. First-lien mortgages, domestic loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=2.3% 0.0 0.5 1.0 1.5 2.0 Percent 2.5 3.0 3.5 4.0 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 130 December 2020 Stress Test Results Figure C.2. Junior liens and HELOCs, domestic loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Median=3.85% Wells Fargo 0 2 4 Percent 6 8 10 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 131 Figure C.3. Commercial and industrial loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=7.25% 0 5 10 15 20 25 30 Percent Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. 132 December 2020 Stress Test Results Figure C.4. Commercial real estate, domestic loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Median=12.75% Wells Fargo 0 10 20 30 Percent 40 50 60 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 133 Figure C.5. Credit card loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=23.7% 0 5 10 15 20 Percent 25 30 35 40 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 134 December 2020 Stress Test Results Figure C.6. Other consumer loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=7.6% 0 5 10 Percent 15 20 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Other consumer loans include student loans and automobile loans. 135 Figure C.7. Other loans loss rates in the severely adverse scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=4.3% 0 3 6 9 12 15 Percent Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Other loans include international real estate loans. 136 December 2020 Stress Test Results Figure C.8. First-lien mortgages, domestic loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=2.2% 0.0 0.5 1.0 1.5 2.0 Percent 2.5 3.0 3.5 4.0 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 137 Figure C.9. Junior liens and HELOCs, domestic loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=3.75% 0 2 4 6 8 10 Percent Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 138 December 2020 Stress Test Results Figure C.10. Commercial and industrial loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=7.3% 0 5 10 15 Percent 20 25 30 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. 139 Figure C.11. Commercial real estate, domestic loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Median=11.85% Wells Fargo 0 10 20 Percent 30 40 50 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 140 December 2020 Stress Test Results Figure C.12. Credit card loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=21.7% 0 5 10 15 20 25 30 35 Percent Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. 141 Figure C.13. Other consumer loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=6.8% 0 5 10 Percent 15 20 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Other consumer loans include student loans and automobile loans. 142 December 2020 Stress Test Results Figure C.14. Other loans loss rates in the alternative severe scenario Ally American Express Bank of America Bank of NY-Mellon Barclays US BMO BNP Paribas USA Capital One Citigroup Citizens Credit Suisse USA DB USA Discover Fifth Third Goldman Sachs HSBC Huntington JPMorgan Chase KeyCorp M&T Morgan Stanley MUFG Americas Northern Trust PNC RBC USA Regions Santander State Street TD Group Truist UBS Americas U.S. Bancorp Wells Fargo Median=4.4% 0 3 6 Percent 9 12 15 Note: Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Other loans include international real estate loans. 143 Appendix D: Technical Information about the Capital Plan Resubmission and Distribution Limitations In the second quarter of 2020, the Board determined that the changes in financial markets or the macroeconomic outlook could have a material effect on each firm’s risk profile and financial condition and require updated capital plans.46 As such, the Board required each firm subject to the Board’s capital plan rule to update and resubmit its capital plan. As a result of a capital plan resubmission, firms are prohibited from making any capital distribution (excluding any capital distribution arising from the issuance of a capital instrument eligible for inclusion in the numerator of a regulatory capital ratio), unless otherwise approved by the Board. The Board is authorizing each U.S. bank holding company (BHC) to make the following capital distributions in the first quarter of 2021: • provided that the firm does not increase the amount of its common stock dividends to be larger than the level paid in the second quarter of 2020, pay common stock dividends and make share repurchases that, in the aggregate, do not exceed an amount equal to the average of the firm’s net income for the four preceding calendar quarters,47 except that: —if the average of the firm’s net income for the four preceding calendar quarters does not exceed an amount equal to one cent per share, the firm may pay common stock dividends of one cent per share; • make share repurchases that equal the amount of share issuances related to expensed employee compensation; and • redeem and make scheduled payments on additional tier 1 and tier 2 capital instruments. 46 47 See 12 C.F.R § 225.8(e)(4)(i)(B)(3). The amount of common stock dividends is calculated on a pershare basis. An “increase” for this purpose is measured relative to the amount of common stock dividends paid in the second quarter of 2020. Foreign banks operating in the U.S. have different payout behavior than domestic banks. In general, the U.S. operations tend to pay a lump sum to the parent foreign bank at the end of the year, instead of quarterly payments. In light of their unique payout behavior, the Board’s authorization is modified for U.S. intermediate holding companies (U.S. IHCs) of foreign banks. Specifically the Board is authorizing each U.S. IHC to make the following capital distributions in the first quarter of 2021: • pay common stock dividends and make share repurchases such that the aggregate amount of dividends and repurchases paid in the final three quarters of 2020 and the first quarter of 2021 does not exceed the amount of net income the firm has earned in the preceding four calendar quarters, except that: —if the average of the firm’s net income for the four preceding calendar quarters does not exceed an amount equal to one cent per share, the firm may pay common stock dividends of one cent per share; • make share repurchases that equal the amount of share issuances related to expensed employee compensation; and • redeem and make scheduled payments on additional tier 1 and tier 2 capital instruments. In addition, for both U.S. BHCs and U.S. IHCs, the automatic distribution limitations under the Board’s capital rule would continue to apply to a firm with a capital ratio below its total capital requirement, inclusive of the firm’s applicable stress capital buffer requirement. Additionally, as a result of a capital plan resubmission, the Board may elect to recalculate a firm’s stress capital buffer requirement. The Board is required to provide notice of whether the firm’s stress capital buffer requirement will be recalculated 144 December 2020 Stress Test Results within 75 calendar days after the date on which the capital plan is resubmitted, unless the Board provides notice to the firm that it is extending the time period. Due to uncertainty about future economic conditions and the ultimate path of the current recovery, the Board is extending the time period to notify firms whether their stress capital buffer requirements will be recalculated until March 31, 2021.48 48 See 12 C.F.R § 225.8(f)(3). www.federalreserve.gov 1220