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Comprehensive Capital Analysis
and Review 2014
Summary Instructions and Guidance
November 1, 2013
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Comprehensive Capital Analysis
and Review 2014
Summary Instructions and Guidance
November 1, 2013
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
v
Contents
Introduction ............................................................................................................................... 1
Instructions for Submission of Capital Plans ................................................................. 5
Submission Format and Timing ................................................................................................... 5
Coverage of the Submission ........................................................................................................ 6
Incomplete Data ......................................................................................................................... 6
Company-Run Stress Testing ...................................................................................................... 7
Mandatory Elements of a Capital Plan .......................................................................... 11
Estimates of Projected Revenues, Losses, Reserves, and Pro Forma Capital Levels ..................... 11
Supporting Documentation for Analyses Used in Capital Plans .................................................... 18
Description of All Capital Actions Assumed over the Planning Horizon ......................................... 19
Expected Changes to Business Plans Affecting Capital Adequacy or Funding .............................. 20
Supervisory Expectations for a BHC’s Capital Adequacy Process ................................................ 21
Supervisory Stress Testing and Capital Plan Assessments
....................................... 23
Quantitative Assessments ......................................................................................................... 23
Qualitative Assessments ........................................................................................................... 24
Federal Reserve Responses to Planned Capital Actions
........................................... 27
Limited Adjustments to Planned Capital Actions ......................................................................... 27
Disclosure of Supervisory Stress Test Results ............................................................................. 27
Resubmissions ......................................................................................................................... 28
Correspondence Related to CCAR ............................................................................................. 28
Appendix A: Templates for Dodd-Frank Act Stress Testing Results
2014 ............................................................................................................................................. 29
Appendix B: Templates for Comprehensive Capital Analysis and
Review Results 2014 .............................................................................................................. 35
1
Introduction
The Federal Reserve’s annual Comprehensive Capital
Analysis and Review (CCAR) is an intensive assessment of the capital adequacy of large, complex U.S.
bank holding companies (BHCs), and of the practices these BHCs use to asses their capital needs. The
Federal Reserve expects these BHCs to have sufficient capital to withstand a severely adverse operating
environment and be able to continue operations,
maintain ready access to funding, meet obligations to
creditors and counterparties, and serve as credit
intermediaries.
As indicated in the Federal Reserve Board’s rule
regarding capital planning (the capital plan rule), the
Federal Reserve’s annual assessment of capital
adequacy for U.S.-domiciled, top-tier BHCs with
total consolidated assets of $50 billion or more will
include consideration of a BHC’s overall financial
condition, risk profile, and capital adequacy on a
forward-looking basis.1 Assessments will also be
made on the overall content of a capital plan and the
strength of the BHC’s capital adequacy process
(CAP), including its capital policy.2 Pursuant to the
capital plan rule, each BHC with total consolidated
assets of $50 billion or more is required to submit a
capital plan approved by the BHC’s board of directors, or a committee thereof, for the Federal
Reserve’s annual CCAR, irrespective of whether the
BHC intends to undertake any capital distributions
over the planning horizon covered in its capital plan.3
1
2
3
The capital plan rule is codified at 12 CFR 225.8. Asset size is
measured as an average over the previous four calendar quarters
as reported on the FR Y-9C regulatory report. If a BHC has
not filed the FR Y–9C for each of the four most recent consecutive quarters, average total consolidated assets means the
average of the company’s total consolidated assets, as reported
on the company’s FR Y–9C, for the most recent quarter or consecutive quarters.
See section 225.8(e)(1)(i) of the capital plan rule. 12 CFR
225.8(e)(1)(i).
The BHCs required to participate in CCAR 2014 are Ally
Financial Inc.; American Express Co.; Bank of America Corp.;
BMO Financial Corp.; The Bank of New York Mellon Corp.;
BB&T Corp.; BBVA Compass Bancshares, Inc.; Capital One
Financial Corp.; Citigroup Inc.; Comerica Inc.; Discover Financial Services; Fifth Third Bancorp.; The Goldman Sachs Group,
For CCAR 2014, capital plans should be submitted
no later than January 6, 2014.4
As outlined in the capital plan rule, the supervisory
review of a BHC’s capital plan includes an assessment of
• the comprehensiveness of the capital plan, including the suitability of the BHC scenarios, and the
extent to which the risk measurement and other
analysis underlying the plan capture and appropriately address potential risks stemming from all
activities across the BHC under baseline and
stressed operating conditions;
• the reasonableness of the BHC’s assumptions and
analysis underlying the capital plan and a review of
the robustness of the BHC’s overall CAP; and
• the BHC’s capital policy.
Importantly, the Federal Reserve has differing expectations across the various aspects of BHCs’ CAP for
BHCs of different sizes, scopes of operations, activities, and systemic importance. For example, the Federal Reserve has significantly heightened supervisory
expectations for the largest and most complex
BHCs—in all aspects of capital planning—and
expects these BHCs to have the most sophisticated,
4
Inc.; HSBC North America Holdings Inc.; Huntington Bancshares Inc.; JPMorgan Chase & Co.; KeyCorp; M&T Bank
Corp.; Morgan Stanley; Northern Trust Corp.; The PNC
Financial Services Group, Inc.; RBS Citizens Financial Group,
Inc.; Regions Financial Corp.; Santander Holdings USA, Inc.;
State Street Corp.; SunTrust Banks, Inc.; UnionBanCal Corp.,
U.S. Bancorp.; Wells Fargo & Co.; and Zions Bancorp. TD
Bank US Holding Company and BancWest Corporation are
not subject to the capital plan rule until July 21, 2015, under the
capital plan rule. See 12 CFR 225.8(b)(2)(i). In addition,
Deutsche Bank Trust Corporation has received an extension
from compliance with the capital plan rule until June 30, 2014.
See www.federalreserve.gov/releases/h2/20130727/h2.pdf.
The capital plan rule requires capital plans to be submitted by
January 5; however, the director of the Division of Banking
Supervision and Regulation, acting under delegated authority
from the Board, has granted an extension of this deadline for
purposes of CCAR 2014 because January 5, 2014, falls on a
Sunday. See section 225.8(d)(1)(ii) of the capital plan rule.
12 CFR 225.8(d)(1)(ii).
2
CCAR 2014 Instructions
Table 1. Minimum regulatory ratios and tier 1 common ratio for CCAR 2014
Minimum ratio
Regulatory ratio
Q4 2013
2014
2015
Advanced approaches BHCs
Tier 1 common ratio
Common equity tier 1 capital ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
4 percent
5.5 percent
8 percent
4 percent
5 percent
4.5 percent
6 percent
8 percent
4 percent
Other BHCs
Tier 1 common ratio
Common equity tier 1 capital ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
4.5 percent
6 percent
8 percent
4 percent
Note: The tier 1 common ratio is to be calculated for each planning horizon quarter using the definition of tier 1 capital and total risk-weighted assets as currently in effect in
2013. All other ratios are to be calculated using the definitions of tier 1 capital and approaches to risk-weighting assets that are in effect during a particular planning horizon
quarter. See “Regulations Y and YY: Application of the Revised Capital Framework to the Capital Plan and Stress Test Rules,” 78 Fed. Reg. 59779 (September 30, 2013).
n.a. Not applicable.
comprehensive, and robust capital planning practices.
In addition, the Federal Reserve recognizes the challenges facing the 12 BHCs that are new to CCAR
and that these BHCs in particular will continue to
work to enhance their capital planning systems and
processes to meet supervisory expectations.
A BHC’s capital plan submission must also include
any capital actions a BHC is planning to take over
the nine-quarter planning horizon, such as dividends
and other capital distributions. The supervisory
review of a BHC’s capital plan includes an assessment of the BHC’s ability to maintain capital levels,
inclusive of any capital actions, above each minimum
regulatory capital ratio and above a tier 1 common
ratio of 5 percent under baseline and stressful conditions throughout the nine-quarter planning horizon.5
See table 1 for a list of the ratios that are applicable
to advanced approaches BHCs and other BHCs,
respectively, over the planning horizon.6
adopted in connection with implementation of the
Basel III accord, including the framework’s minimum regulatory capital ratios and transition arrangements.7 A BHC’s capital plan is also required to
reflect the company’s tier 1 common ratio for each
quarter of the planning horizon using the definitions
of tier 1 capital and total risk-weighted assets as in
effect in 2013. The use of the tier 1 common ratio in
CCAR 2014 is explained in greater detail in the Federal Reserve’s interim final rule “Application of the
Revised Capital Framework to the Capital Plan and
Stress Test.”8 A BHC’s capital plan submission must
also include a transition plan for full implementation
of Basel III, including the BHC’s best estimate of
any capital surcharge for global systemically important banks.9
7
As the table indicates, a BHC’s capital plan must
reflect the revised capital framework that the Board
5
6
See section 225.8(e)(1)(i) of the capital plan rule. 12 CFR
225.8(e)(1)(i).
For purposes of CCAR 2014, an advanced approaches BHC
includes a BHC that has consolidated assets greater than or
equal to $250 billion or total consolidated on-balance sheet foreign exposure of at least $10 billion as of December 31, 2013.
See Regulatory Capital Rules, infra, note 7; 12 CFR part 225,
appendix G, section 1(b). Other BHCs include any BHC that is
subject to 12 CFR 225.8 and is not an advanced
approaches BHC.
8
9
See Department of the Treasury, Office of the Comptroller of
the Currency, and Board of Governors of the Federal Reserve
System (2013), “Regulatory Capital Rules: Regulatory Capital,
Implementation of Basel III, Capital Adequacy, Transition Provisions, Prompt Corrective Action, Standardized Approach for
Risk-Weighted Assets, Market Discipline and Disclosure
Requirements, Advanced Approaches Risk-Based Capital Rule,
and Market Risk Capital Rule” (Regulatory Capital Rules), 78
Fed. Reg. 62017 (October 11, 2013).
See “Regulations Y and YY: Application of the Revised Capital
Framework to the Capital Plan and Stress Test Rules,” 78 Fed.
Reg. 59779 (September 30, 2013).
See Basel Committee on Banking Supervision (2013), “Global
Systemically Important Banks: Updated Assessment Methodology and the Higher Loss Absorbency Requirement,” rules text
(Basel: BCBS, July), www.bis.org/publ/bcbs255.htm.
November 1, 2013
The capital plans must reflect the results of each
BHC’s company-run stress test using three scenarios
that the Federal Reserve is providing under the
Board’s rules implementing sections 165(i)(1) and
(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA stress test rules). The
supervisory scenarios provided by the Federal
Reserve are the baseline scenario, the adverse scenario, and the severely adverse scenario. The results
of the company-run stress test required under the
Dodd-Frank Act should reflect the capital action
assumptions required under the DFA stress test rules
(DFA stress test capital actions).10 In addition, for
the supervisory adverse and severely adverse scenarios, which will inform the CCAR post-stress capital analysis, each BHC must also submit estimated
pro forma capital ratios calculated with the BHC’s
planned capital actions as included in a BHC baseline scenario.
In addition to three supervisory scenarios, each BHC
must conduct a stress test based on its own scenarios,
including at least one stress scenario (BHC stress scenario) and a baseline scenario (BHC baseline scenario). Each BHC must then submit the results of
the BHC baseline scenario using the BHC’s planned
capital actions and the results of the BHC stress scenario(s) using any alternative capital actions (if
applicable). As discussed further below, under certain
conditions a BHC can choose to use the supervisory
baseline scenario as its own baseline scenario. (See
the “Company-Run Stress Testing” section for further discussion of this topic.)
In conducting its supervisory stress tests of BHCs
under the DFA stress test rules, the Federal Reserve
will use the same scenarios and assumptions as the
BHCs are required to use under the DFA stress test
rules to project revenues, losses, net income, and pro
forma capital ratios.11 In addition, the Federal
Reserve will independently project BHCs’ balance
sheet and risk-weighted assets over the nine-quarter
planning horizon, using the same macroeconomic
scenarios, to increase the comparability of supervisory stress test results across BHCs.
The Federal Reserve expects to publish both a summary of results of the supervisory stress tests conducted under the DFA stress test rules and a summary of the post-stress capital analysis component of
the CCAR results by March 31.12 In both cases, the
Federal Reserve expects that the results disclosed will
be those resulting from the stress tests under both the
supervisory adverse and the supervisory severely
adverse scenarios.
Under the DFA stress test rules, BHCs are also
required to publish a summary of their stress test
results under the supervisory severely adverse scenario (using DFA stress test capital actions) between
March 15 and March 31.13 The Federal Reserve
expects that the publication of summary results from
both the supervisory and company-run stress tests
will enhance public information about BHCs’ financial condition and the ability of these BHCs to
absorb losses as a result of adverse economic and
financial conditions.
11
12
10
12 CFR 252.146(b).
3
13
See id.
12 CFR 252.136(b) and (c).
12 CFR 252.148(c).
5
Instructions for Submission of Capital Plans
This instructions document provides
• general logistics for BHCs’ capital plan
submissions;
• guidelines surrounding the mandatory elements of
a capital plan;
• information about the Federal Reserve’s qualitative
assessment of each BHC’s capital plan during
CCAR 2014;
• description of the Federal Reserve’s quantitative
assessment of post-stress capital;
• information on the Federal Reserve’s response to
capital plans and planned actions;
• limited adjustments BHCs may make to their
planned capital distributions during the CCAR
exercise;
• a discussion of planned disclosures at the end of
the CCAR exercise; and
• information related to possible required resubmissions following CCAR.
BHCs should refer to the Federal Reserve’s Capital
Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice
(available at www.federalreserve.gov/bankinforeg/
bcreg20130819a1.pdf) for further guidance about
supervisory expectations for a BHC’s capital planning process.
Submission Format and Timing
Each BHC’s capital plan, along with any proposals
for planned capital actions in the BHC baseline scenario or alternative capital actions in the BHC stress
scenario, must be approved by the BHC’s board of
directors, or committee thereof, and submitted to the
Federal Reserve no later than January 5 of each calendar year in accordance with the capital plan rule.
As noted earlier, the Federal Reserve may extend this
date. For CCAR 2014, capital plans and proposals
for capital actions must be received no later than
Monday, January 6.
In connection with the annual CCAR exercise, the
Federal Reserve will use the data and information
provided in the FR Y-14A, FR Y-14Q, and FR
Y-14M regulatory reports as of September 30, 2013
(except for trading and counterparty data, as discussed in more detail below). BHCs should reference
the instructions associated with each schedule to
determine the appropriate submission date for each
regulatory report.14 Data reported on the FR Y-14Q
and FR Y-14M schedules will be used as the primary
input to the annual supervisory stress test conducted
by the Federal Reserve under the DFA stress test
rules and will be used in the CCAR analysis. BHCs
will report on the FR Y-14A schedules their estimates of losses, resources available to absorb those
losses, balance sheet positions, and capital composition on a quarterly basis over the nine-quarter planning horizon, under each scenario, beginning with
the fourth quarter of the current calendar year.
BHCs are also required to submit qualitative information supporting their loss and pre-provision net
revenue (PPNR) estimates, including descriptions of
the methodologies used to produce the estimates, as
well as any other analyses that support their capital
plans.
Each BHC must submit its capital plan and any supporting information, including the FR Y-14A and
FR Y-14Q schedules, to the Federal Reserve through
a secure collaboration site. BHCs should continue to
submit FR Y-14M schedules using established processes outlined within the instructions for each regulatory report.15
14
15
See www.federalreserve.gov/reportforms.
See id.
6
CCAR 2014 Instructions
Coverage of the Submission
CCAR is a comprehensive assessment that takes into
account all relevant risks to the BHC, such as estimates of potential losses and the impact of the stress
scenarios on net revenues, including any that are not
explicitly covered by the information requested in the
FR Y-14A, FR Y-14Q, and FR Y-14M schedules. It
is the responsibility of each BHC to capture all
potential sources of losses from all on{ and off{
balance sheet positions, as well as any other events
that have the potential to impact capital in both baseline and stressful environments. Notably, the Federal
Reserve will place particular focus on assessing a
BHC’s internal stress scenario analysis as part of the
supervisory assessment of the completeness and suitability of each BHC’s capital plan.16
A BHC’s submission of its pro forma, post{stress
capital projections in its capital plan, inclusive of
planned or alternative capital actions, must begin
with data as of September 30, and span the ninequarter planning horizon, beginning in the fourth
quarter of the current calendar year and concluding
at the end of the fourth quarter, two years out. For
CCAR 2014, the planning horizon will commence at
the beginning of the fourth quarter of 2013 (October 1, 2013) and conclude at the end of the fourth
quarter of 2015 (December 31, 2015). The only
exception to this planning horizon is with respect to
the Regulatory Capital Transitions schedule submission required under the FR Y-14A. This schedule
was formerly known as the Basel III and DoddFrank schedule. The Regulatory Capital Transitions
schedule should be reported as of September 30,
2013, with projections through December 31, 2018,
under the supervisory baseline scenario.
Incomplete Data
In general, all BHCs are required to report all data
elements asked for in the FR Y-14A, FR Y-14Q, and
FR Y-14M schedules; however, certain schedules,
worksheets, or data elements may be optional for a
BHC. The instructions for the FR Y-14A, FR
Y-14Q, and FR Y-14M schedules provide details on
how to determine whether a BHC must submit a specific schedule, worksheet, or data element.
Under the capital plan rule, failure to submit complete data to the Federal Reserve in a timely manner
may be a basis for objection to a capital plan.17 A
BHC’s inability to provide required data by the due
dates may affect supervisory estimates of losses and
PPNR for the BHC, and bears on the Federal
Reserve’s qualitative assessment of the internal riskmeasurement and risk-management practices supporting a BHC’s CAP.
For the FR Y-14Q and FR Y-14M schedules, BHCs
may be asked to resubmit data—either in whole or in
part—after the initial due date as specified in the
associated report instructions if required data elements are missing or if errors are found during the
data validation process.18 All resubmissions of FR
Y-14Q and FR Y-14M data as of September 30 will
be due on or before December 31 of the current calendar year. After this date, the Federal Reserve will
adhere to the following guidelines on any remaining
FR Y-14Q and FR Y-14M data-related issues, for the
purpose of producing supervisory estimates.
• Missing data or data deficiency: If a BHC’s submitted data quality is deemed to be too deficient to
produce a robust supervisory model estimate for a
particular portfolio, the Federal Reserve may
assign a high loss rate (e.g., 90th percentile) or a
conservative PPNR rate (e.g., 10th percentile)
based on portfolio losses or PPNR estimated for
other BHCs. If data that are direct inputs to supervisory models are missing or reported erroneously
but the problem is isolated in a way that the existing supervisory framework can still be used, a conservative value (e.g., 10th or 90th percentile) based
on all available data will be assigned to the specific
data.
• Immaterial portfolio: Each BHC has the option to
either submit or not submit the relevant data
schedule for a given portfolio that does not meet a
materiality threshold (as defined in FR Y-14Q and
FR Y-14M instructions). If the BHC does not submit data on its immaterial portfolio(s), the Federal
Reserve will assign a conservative loss rate (e.g.,
75th percentile), based on the estimates for other
BHCs. Otherwise, the Federal Reserve will estimate
losses using data submitted by the BHC.
17
18
16
See section 225.8(e)(1)(i)(A) of the capital plan rule. 12 CFR
225.8(e)(1)(i)(A).
See section 225.8(e)(2)(ii) of the capital plan rule. 12 CFR
225.8(e)(2)(ii).
Due dates are specified in the FR Y-14Q and FR Y-14M General Instructions, which are available on the Federal Reserve
Board’s website. See note 14.
November 1, 2013
For the FR Y-14A schedules, BHCs should submit
final and complete data for CCAR 2014 by January 6. BHCs may be asked to resubmit data—either
in whole or in part—after this due date should errors
or omissions be found; however, failure to submit
complete data to the Federal Reserve in a timely
manner may be a basis for objection to a capital plan.
Company-Run Stress Testing
For purposes of CCAR, BHCs will be required to
submit the results of company-run stress tests based
on three supervisory scenarios (DFA supervisory
stress test scenarios), at least one stressed scenario
developed by the BHC, and a BHC baseline scenario,
as follows:
• BHC baseline: a BHC{defined baseline scenario19
7
• the scenario results in a substantial strain on the
BHC’s ability to generate revenue and absorb
losses and a significant reduction in post-stress
capital ratios relative to baseline projections; and
• the translation of the scenario into loss, revenue,
and post-stress capital projections is conceptually
sound and implemented in a well-controlled
manner.
While the BHC stress scenario is expected to be
severe enough to result in a substantial negative
impact on capital, a BHC stress scenario that produces post-stress capital ratios lower than those
under the supervisory severely adverse scenario is
not, in and of itself, a safe harbor. It is critical that
the BHC stress scenario be well designed to capture
potential risks stemming from a BHC’s idiosyncratic
positions and activities.
• BHC stress: at least one BHC{defined stress
scenario
Supervisory Scenarios
• Supervisory baseline: a baseline scenario provided
by the Federal Reserve under the DFA stress test
rules
Under the DFA stress test rules, the Federal Reserve
must provide BHCs with a description of the supervisory macroeconomic scenarios no later than
November 15 of each calendar year.20 For CCAR
2014, the Federal Reserve is making the supervisory
macroeconomic scenarios available concurrently with
these instructions. The Federal Reserve will provide
the global market shocks to the appropriate BHCs by
December 1, 2013. It is important to note that the
scenarios provided by the Federal Reserve are not
forecasts, but rather hypothetical scenarios to be used
to assess the strength and resilience of BHC capital
in baseline and stressed economic and financial market environments.
• Supervisory adverse: an adverse scenario provided
by the Federal Reserve under the DFA stress test
rules
• Supervisory severely adverse: a severely adverse scenario provided by the Federal Reserve under the
DFA stress test rules
The Federal Reserve will incorporate both the supervisory stress test results and the BHC’s ability to sufficiently capture its unique vulnerabilities within the
BHC scenarios into the overall supervisory assessment of each BHC’s capital plan. The Federal
Reserve will focus particular attention on the processes surrounding the development and implementation of the BHC stress scenario to ensure that
• these processes are robust;
• the scenario captures and stresses key vulnerabilities and idiosyncratic risks facing the BHC, including any vulnerabilities that are not particularly well
captured by scenario analysis based on a stressed
macroeconomic environment or severe recession;
19
A BHC may use the same baseline scenario as the supervisory
baseline scenario if the BHC believes the supervisory baseline
scenario appropriately represents its view of the most likely outlook for the risk factors salient to the BHC. Any BHC electing
to do so should provide appropriate supporting documentation.
The Federal Reserve will evaluate the BHC’s pro
forma, post-stress capital ratios resulting from the
combination of stress performance measures (e.g.,
revenues, losses, and reserves from the supervisory
adverse and severely adverse scenarios) and the
BHC’s planned capital actions (e.g., planned dividends, issuances, and repurchases as provided in the
BHC baseline scenario) against each minimum regulatory capital ratio and a 5 percent tier 1 common
ratio in each of the nine-quarter planning horizon.
For the BHC-defined scenarios, a BHC should
include only one capital worksheet within each FR
Y-14A Summary schedule, and include pro forma
projections using the BHC’s expected capital actions
as deemed appropriate by the BHC for that scenario
20
12 CFR 252.144(b).
8
CCAR 2014 Instructions
Table 2. Capital worksheet requirements
Scenario
BHC baseline
Supervisory baseline*
BHC stress
Supervisory adverse
Supervisory severely adverse
Capital worksheet 1 Capital worksheet 2
Planned capital
actions
Planned capital
actions
Alternative capital
actions
Planned capital
actions
Planned capital
actions
n/a
DFA stress test
capital actions
n/a
DFA stress test
capital actions
DFA stress test
capital actions
* If a BHC determines the supervisory baseline scenario to be appropriate for its
own BHC baseline, the BHC may submit identical FR Y-14A Summary schedules
with the exception of the capital worksheets noted above. All BHCs must complete
two capital worksheets for the supervisory baseline and supervisory severely
adverse scenario.
n.a. Not applicable.
and in accordance with the BHC’s capital policy. For
the supervisory scenarios, a BHC should include two
sets of pro forma projections, reported in two separate capital worksheets within the FR Y-14A Summary schedule—one set of projections using the
BHC’s planned capital actions under the BHC baseline scenario and another set using the DFA stress
test capital action assumptions.
The following definitions and table 2 illustrate the
number of capital worksheet requirements for each
scenario’s FR Y-14A schedule.
• Planned capital actions: a BHC’s planned capital
actions under the BHC baseline scenario
• Alternative capital actions: a BHC’s assumed capital actions under the BHC stress scenario
• DFA stress test capital actions: capital action
assumptions as required under the DFA stress test
rules21
Six BHCs with large trading operations will be
required to include the global market shock as part
of their supervisory adverse and severely adverse scenarios, and to conduct a stress test of their trading
books and private equity positions (including their
credit valuation adjustments, or CVAs) as of October 16, 2013.22 The Federal Reserve will provide a set
of hypothetical shocks to the risk factors most relevant to the trading and counterparty positions. As
21
22
Id.
The six BHCs participating in the global market shock are Bank
of America Corporation; Citigroup Inc.; The Goldman Sachs
Group, Inc.; JPMorgan Chase & Co.; Morgan Stanley; and
Wells Fargo & Company.
in the previous year, for CCAR 2014, these BHCs
will also be required to submit additional data to the
Federal Reserve related to their European exposures
in the form of two supplemental templates.23
In addition, eight BHCs with substantial trading or
custodial operations will be required to incorporate a
counterparty default scenario component into their
supervisory adverse and severely adverse stress scenarios.24 Specifically, these eight BHCs are required
to estimate and report the potential losses and related
effects on capital associated with the instantaneous
and unexpected default of their largest counterparty
across their derivatives, securities lending, and
repurchase/reverse repurchase agreement (collectively, Securities Financing Transactions or SFTs)
activity. Each BHC’s largest counterparty should be
determined by net stressed losses, which are computed by revaluing exposures and collateral using the
set of hypothetical asset price shocks specified in the
Federal Reserve’s global market shock. The as-of
date for the counterparty default scenario component will also be October 16, 2013. These BHCs will
also be required to submit additional data in the form
of a supplemental template and documentation to
the Federal Reserve related to the counterparty
default scenario component, including information
regarding their SFT and derivative activities.
BHC Baseline and Stress Scenarios
A BHC’s scenario design process should involve
development of scenarios that affect the BHC as a
whole, stemming from macroeconomic and financial
market conditions, and should also include potential
BHC-specific events. Assumptions should remain
constant across business lines and risk areas for the
chosen scenario, since the objective is to see how the
BHC as a whole will be affected by a common and
internally consistent scenario. A BHC should consider the best manner in which to capture combinations of stressful events and circumstances, including
second-order and “knock-on” effects that may result
23
24
Separately, the six trading BHCs will need to submit additional
data to the Federal Reserve related to hedges on loans for which
they have adopted fair-value accounting in the form of a
supplemental template.
The eight BHCs participating in the counterparty default component are Bank of America Corporation; The Bank of New
York Mellon Corporation; Citigroup, Inc.; The Goldman Sachs
Group, Inc.; JPMorgan Chase & Co.; Morgan Stanley; State
Street Corporation; and Wells Fargo & Company. All but State
Street Corporation and The Bank of New York Mellon Corporation also participate in the global market shock.
November 1, 2013
from the specified economic and financial environment or any potential BHC-specific event.
The BHC baseline scenario should reflect the BHC’s
view of the expected path of the economy over the
planning horizon. A BHC may use the same baseline
scenario as the Federal Reserve baseline scenario if
that BHC believes the Federal Reserve baseline scenario appropriately represents its view of the most
likely outlook for the risk factors salient to the
BHC.25
The BHC stress scenario should be based on a coherent, logical narrative of a severely adverse economic
and financial market environment and potential
BHC-specific events. This scenario narrative should
detail key events and circumstances that occur in the
scenario. As required in the FR Y-14A Scenario
25
See note 19.
9
schedule, the BHC must provide the quarterly trajectories of key macroeconomic and financial variables
for its BHC baseline and BHC stress scenario.
A BHC’s stress scenario should describe a severely
adverse hypothetical combination of circumstances
designed with the BHC’s particular vulnerabilities in
mind. Specifically, and as noted earlier, the BHC
stress scenario should be designed to stress factors
that affect all of the company’s material exposures
and activities, capturing potential exposures from
both on- and off-balance sheet positions. In addition,
the forward-looking analysis required in the BHC
stress scenario should be relevant to the direction and
strategy set by a BHC’s board of directors.26
26
Additional guidance related to scenario development as part of
stress testing can be found in SR letter 12-7, “Supervisory Guidance on Stress Testing for Banking Organizations with More
Than $10 Billion in Total Consolidated Assets,” www
.federalreserve.gov/bankinforeg/srletters/sr1207.htm.
11
Mandatory Elements of a Capital Plan
The capital plan rule defines a capital plan as “a written presentation of a company’s capital planning
strategies and CAP that includes certain mandatory
elements.” These mandatory elements are organized
into five main components:
1. an assessment of the expected uses and sources of
capital over the planning horizon
2. a description of all planned capital actions over
the planning horizon
3. a discussion of any baseline changes to the
BHC’s business plan that are likely to have a
material impact on the BHC’s capital adequacy
or liquidity
4. a detailed description of the BHC’s process for
assessing capital adequacy
5. a BHC’s capital policy27
A BHC is required to conduct an assessment of the
expected uses and sources of capital over the planning horizon assuming both expected and stressful
conditions. This assessment must contain the following elements:
• estimates of projected revenues, losses, reserves,
and pro forma capital levels, including any regulatory capital ratios (for example, tier 1 leverage,
common equity tier 1 capital, tier 1 risk-based capital, and total risk-based capital ratios) and any
additional capital measures deemed relevant by the
BHC, over the planning horizon under baseline
conditions and under a range of stressed scenarios;
these must include any scenarios provided by the
Federal Reserve and at least one stress scenario
developed by the BHC appropriate to its business
model and portfolios
• a calculation of the pro forma tier 1 common ratio
over the planning horizon under baseline conditions and under a range of stressed scenarios inclu27
See section 225.8(d)(2) of the capital plan rule. 12 CFR
225.8(d)(2).
sive of a discussion of how the company will maintain all minimum regulatory capital ratios and a
pro forma tier 1 common ratio above 5 percent
under expected conditions and the stressed scenarios required
• a discussion of the results of the stress tests
required by law or regulation, and an explanation
of how the capital plan takes these results into
account
• a description of all planned capital actions over the
planning horizon
The remainder of this section provides additional
detail on these elements.
Estimates of Projected Revenues,
Losses, Reserves, and Pro Forma
Capital Levels
As noted earlier, for the purposes of CCAR, BHCs
are to submit capital plans supported by their internal capital adequacy assessment and capital planning
processes and include pro forma analyses in each of
the five scenarios. The Federal Reserve will be assessing the processes and practices the BHCs have in
place to carry out this analysis, including the riskidentification, risk-measurement, and riskmanagement practices supporting their analyses, as
well as the governance and controls around these
practices.
Importantly, the format the Federal Reserve uses to
collect the FR Y-14 data does not imply that BHCs
should use any specific methodology to project their
losses and revenues for their stress tests or for any
other internal analysis used to support their capital
plans; rather, a BHC’s submissions for each scenario
should be based on its own processes and analyses.
The Federal Reserve’s qualitative assessment of the
capital plans will focus on the robustness of a BHC’s
12
CCAR 2014 Instructions
internal CAP, with a particular focus on the BHC
stress scenario and the translation of the BHC stress
scenario into projected losses, revenues, and pro
forma post-stress capital ratios.
BHCs should demonstrate that their results are consistent with the environments specified in the scenarios being used, and that the various components
of their results are internally consistent. For example,
it might be inconsistent to project a shrinking balance sheet while also projecting large increases in net
income in a stress or baseline environment. BHCs
should submit background information on the methodologies supporting their estimates. This material
should include discussion of key approaches and
assumptions used to measure BHC-wide exposures
and to arrive at stress loss estimates, along with relevant background on positions or business lines that
could have a material influence on outcomes.
A BHC should clearly identify and document in its
capital plan any aspects of its portfolios and exposures (e.g., a contractual loss-mitigation arrangement, exposures not well captured in the reporting
framework, etc.) that are not adequately captured in
the FR Y-14Q or FR Y-14M and that it believes are
material to loss estimates for its portfolios, as well as
the BHC’s estimate of the potential impact of such
items on loss estimates under the baseline and stress
scenarios.
In general, BHCs should incorporate the following
into their pro forma estimates:
Definition of losses for loans: The losses to be estimated for loans held in accrual portfolios in this exercise are generally credit losses due to failure to pay
obligations (cash flow losses), rather than discounts
related to mark-to-market (MTM) values. In some
cases, BHCs may have loans that are being held for
sale or which are subject to purchase-accounting
adjustments. In these cases, the analysis should
anticipate the change in value of the underlying asset,
apply the appropriate accounting treatment, and
determine the incremental losses.
Loan-loss estimates: BHCs should describe the
underlying models and methods used to project loan
losses, and provide background on the derivation of
estimated losses. Factors that could be cited to support the reasonableness of estimated losses include
(but are not limited to) composition of the loan portfolios within a broad category (e.g., distribution
among prime, Alt-A, and subprime loans within
first-lien residential mortgages) and specific characteristics of the portfolio within categories or subcategories (e.g., vintage, credit score, loan-to-value ratio,
regional distribution, industry mix, ratings distribution, or collateral type). Hypothetical behavioral
responses by BHC management should not be considered as mitigating factors for the purposes of this
analysis. For example, hedges already in place should
be accounted for as potential mitigating factors, but
not assumptions about potential future hedging
activities.
Commitments and contingent and potential obligations: The analysis should reflect expectations of customer drawdowns on unused credit commitments
under each scenario, as well as any assets and exposures that might be taken back on the balance sheet
or otherwise generate losses under stressful economic
conditions (e.g., assets held in asset-backed commercial paper conduits and other off-balance sheet funding vehicles to which the BHC provides support).
Unconsolidated entities to which the BHC has potential exposure are also within the scope of this exercise
and should be considered. If it is envisioned that
non-contractual support may be provided during a
stressful environment for certain obligations or exposures of sponsored or third-party entities, these
should be included in a BHC’s analysis of contingent
or potential obligations, and all associated impacts
should be captured.
Losses on available-for-sale (AFS) and held-tomaturity (HTM) securities: BHCs should provide
projected other-than-temporary impairments (OTTI)
for AFS and HTM securities. OTTI projections
should be based on September 30, 2013, positions
and should be consistent with specified macroeconomic assumptions and standard accounting treatment. If the BHC bifurcates credit losses from other
losses, the method for deriving the bifurcation should
be provided in supporting documentation.
Other comprehensive income: Advanced approaches
BHCs should project other comprehensive income
(OCI), including unrealized gains and losses on their
AFS securities, and the effect of changes in accumulated OCI on capital under each scenario in a manner
consistent with the phasing-in of the revised capital
requirements over the nine-quarter planning horizon.
Allowance for loan losses: BHCs should estimate the
portion of the current allowance for loan losses available to absorb credit losses on the loan portfolio for
November 1, 2013
each quarter under each scenario, while maintaining
an adequate allowance along the scenario path and at
the end of the planning horizon. Loan-loss reserve
adequacy should be assessed against the likely size,
composition, and risk characteristics of the loan
portfolio throughout the planning horizon in a manner that is consistent with the BHC’s projections of
losses over that scenario.
Non-U.S. exposures: Loss, revenue, and loan-loss
reserve projections should cover positions and businesses for the BHC on a global consolidated basis. To
the extent that loss experience on foreign positions is
projected to differ from that on U.S. positions, BHCs
should provide supporting information to explain
those differences. For example, if the BHC is using
different loss rates for foreign positions, those foreign
positions should be explicitly identified and reported
separately, by position or loan type, in the BHC’s
supporting documentation.
Fair-value loans: BHCs may have loans that are held
for sale or held for investment, for which they have
adopted fair-value accounting (collectively, fair-value
loans). For company-run stress tests conducted under
the supervisory scenarios, BHCs should project
losses on fair-value loans for each quarter throughout the nine-quarter planning horizon, using the
macroeconomic scenarios, and report such losses in
the relevant items on the PPNR projections worksheet of the FR Y-14A Summary schedule in accordance with the BHC’s normal accounting procedures.
For all company-run stress tests, including those conducted under BHC scenarios, BHCs should clearly
document the method and key assumptions used to
compute losses on fair-value loans.
Risk-weighted asset (RWA) projections: BHCs should
provide detailed support for all assumptions used to
derive projections of RWAs, including assumptions
related to components of balance sheet projections
(on- and off-balance sheet balances and composition), income statement projections, underlying risk
attributes of exposures, and any known weakness in
the translation of assumptions into RWA estimates
for each scenario. For example, BHCs should demonstrate how credit RWAs over the planning horizon
are related to projected loan growth under the macroeconomic scenario, increased credit provisions or
charge-offs for loan portfolios, and changing economic assumptions as well as how market RWAs are
related to market factors (e.g., volatility levels, equity
index levels, bond spreads, etc.) and projected trading
revenue.
13
Each BHC should demonstrate that these assumptions are clearly conditioned on a given scenario and
are consistent with stated internal and external business strategies. If BHC{specific assumptions (other
than broad macroeconomic assumptions) are used,
the BHC should also describe these assumptions and
how they relate to reported RWA projections. If the
BHC’s models for projecting RWAs rely upon historical relationships, the BHC should provide the historical data and clearly describe why these relationships
are expected to be maintained in each scenario.
Treatment of trading and counterparty RWAs: Any
BHC subject to the market risk rule must use standard specific risk charges for any position(s) or portfolio(s) for which the BHC has not received specific
risk-model approval, incremental risk-model
approval, or comprehensive risk-model approval as of
January 6, 2014.28 In addition, if a BHC does not
have an approved Stressed Value at Risk (SVaR)
model as of January 6, 2014, the BHC must specify
this in writing.
Balance sheet projections: Balance projections are a
critical input to loss and revenue estimates. BHCs are
expected to demonstrate that the approach used to
generate those projections is internally consistent and
conditioned appropriately on the implications of the
macroeconomic scenario. Ultimately, balances are
driven by the dynamic interaction of various flows
through the planning horizon. The models and business processes used to make balance projections
should be sufficiently documented so as to allow for
supervisory assessment.
Balance projections should reconcile to projections
for originations, pay-downs, drawdowns, and losses
under each scenario. In stressed macroeconomic scenarios, care should be taken to justify major changes
in portfolio composition based, for example, on
assumptions about a BHC’s strategic direction,
including events such as material sales or purchases.
Loan balance projections should be consistent with
internally generated paths of originations, paydowns, drawdowns, losses, purchases, and sales under
any scenario. The losses used in producing balances
should be the same as those produced in internal
loss-estimate modeling for the stress test. Prepayment
behavior should link to the relevant economic scenario and the maturity profile of the asset portfolio.
Any assumed reallocation of assets into securities or
28
See Regulatory Capital Rules, note 7; 12 CFR part 225, appendix E.
14
CCAR 2014 Instructions
cash should recognize the limits of portfolio transformation under stress due to market pressures and current portfolio characteristics, including the likely
state of interbank lending markets and deposit levels.
External consistency is also an important consideration for balance projections. To the extent that
changes in the balance sheet are driven by a BHC’s
strategic direction, care should be taken to document
and explain in detail that underlying assumptions are
reasonable in a stressed economic environment. Specifically, BHCs should evaluate the consequences of
other market participants possibly taking actions
similar to their own in a stressed environment—for
example, the possible positive outcomes that might
be obtained if a BHC were the only market participant taking such actions in a particular market environment are likely to be mitigated if others are also
attempting to take similar actions.
Global market shock in supervisory scenarios for the
six largest trading BHCs: For company-run stress
tests conducted under the supervisory scenarios, the
six BHCs with substantial trading and counterparty
exposures (trading BHCs) are required to apply a
global market shock to their trading book and private equity positions (including their CVAs) as of a
particular market close date and estimate trading and
counterparty mark-to-market losses and incremental
default risk (IDR) on their trading exposures.29 The
six trading BHCs are not required to estimate IDR
losses on their counterparty exposures. The Federal
Reserve will provide to these trading BHCs a set of
hypothetical shocks to the risk factors most relevant
to trading, private equity, and CVA positions. The
global market shock should be applied to trading
BHCs’ trading book and private equity positions
(including their CVAs) as of October 16, 2013.30
Trading BHCs must use the set of hypothetical risk
factor shocks the Federal Reserve provides to produce the profit and loss (P/L) estimates for their trading, private equity, and counterparty credit losses
from the global market shock. All estimated losses
associated with the global market shock the Federal
Reserve provides as part of the supervisory scenarios
should be reported in the initial quarter of the planning horizon.
29
30
Note 22 lists the six BHCs participating in the global market
shock; see also 12 CFR 252.144(b)(2).
The risk factor shocks will be provided in a format that is analogous to that of the FR Y-14Q schedule for Trading, Private
Equity, and Other Fair Value Assets.
In cases in which the specified shocks provided are
not directly compatible with the BHC’s internal systems, the BHC is expected to interpolate or extrapolate around the given points to determine the appropriate shock. Supporting documentation should
include a description of the methods used to interpolate or extrapolate.
The result of the global market shock is to be taken
as an instantaneous loss and reduction of capital calibrated on applicable trading book and private equity
positions, as of a point in time. For CCAR 2014, this
as-of-date is October 16, 2013. BHCs should not
assume a related decline in portfolio positions or
RWAs as a result of these market shock losses. The
global market shock should be treated as an add-on
that is exogenous to the macroeconomic and financial market environment specified in the supervisory
stress scenarios.
These instantaneous losses are to be measured as an
additional shock beyond the estimates of preprovision net revenue (PPNR) and losses under the
macroeconomic scenario. It is assumed that the
global market shock could occur at any time over the
nine-quarter planning horizon, though for the purposes of the post-stress capital analysis, these losses
are run through net income in the first quarter of the
planning horizon. By assuming no recoveries of the
losses generated by the global market shock over the
nine quarters, the capital impact is carried over
throughout the planning horizon, with the effect of
measuring post-stress capital ratios inclusive of the
global market shock and the macro scenario in every
quarter.
In projecting losses and PPNR under the supervisory
stress scenarios related to its trading and counterparty positions, including private equity, if a BHC
can demonstrate that its loss-estimation methodology
stresses identical positions under both the global
market shock and the macro scenario, the BHC may
assume that the combined losses from such positions
do not exceed losses resulting from the higher of
either the losses stemming from the global market
shock or those estimated under the macro scenario.
However, the full effect of the global market shock
must be taken through net income in the first quarter
of the planning horizon.
If a BHC makes any adjustment to account for the
identical positions, the BHC must provide documentation demonstrating that the losses generated under
the macro scenario are on identical positions to those
November 1, 2013
subject to the global market shock, break out each of
the adjustments as a separate component of PPNR,
and describe the rationale behind any such
adjustments.
Counterparty default scenario component of supervisory scenarios for the eight global systemically important banks: Engagement in substantial trading or custodial operations makes the eight BHCs subject to
the counterparty default scenario component particularly vulnerable to the default of their major
counterparty or their clients’ counterparty (in transactions for which the companies act as agents).31 To
assess the effect of such a default on their capital,
these BHCs are required to apply a counterparty
default scenario component to their SFT and
derivatives-related counterparty exposures.32 SFT
activities subject to the counterparty default scenario
component include all activities, excluding intraday
transactions, that meet the definition of a repo-style
transaction under section 2 of appendix G to
12 CFR part 225.33 Similar to the global market
shock, the counterparty default scenario component
should be treated as an add-on to the macroeconomic and financial market scenarios specified in the
Federal Reserve’s supervisory adverse and severely
adverse scenarios.
The counterparty default scenario component
involves an instantaneous and unexpected default of
a BHC’s largest counterparty, and the potential
losses and effects on capital associated with such a
default.34 A BHC should select its largest counterparty by identifying the counterparty that represents
the largest total net stressed loss if the counterparty
defaulted on its obligations related to derivatives and
SFT activities as of October 16, 2013.35 For the purposes of selecting their largest counterparty, BHCs
31
32
33
34
35
Note 24 lists the eight BHCs participating in the counterparty
default component.
Six out of the eight BHCs are also subject to the global market
shock.
Section F.5 of the FR Y-14A instructions includes a full definition of SFT activities subject to the counterparty default scenario component.
Any losses associated with the counterparty default scenario
component would replace losses related to counterparty incremental default risk as currently reported on line 3, “Counterparty Incremental Default Losses (CCR IDR),” of the Counterparty Risk Worksheet of the FR Y-14A Summary schedule.
BHCs should report a zero for lines 3 and 3a of the Counterparty Risk Worksheet. Losses associated with the counterparty
default scenario component would be reported on line 4, “Other
CCR Losses,” of that Counterparty Risk Worksheet.
The Federal Reserve will provide the global market shocks,
which should be applied to BHCs’ derivatives, SFT, and trading
books to estimate losses, no later than December 1, 2013.
15
should exclude the sovereign entities that are members of the G-7—Canada, France, Germany, Italy,
Japan, the United Kingdom, and the United States—
and designated clearing counterparties.36 The total
net stressed loss amount associated with the largest
counterparty defaulting is to be reported as the loss
associated with the counterparty default scenario
component.
While all eight BHCs must calculate net stressed
losses on their derivative contracts, there are some
differences in the way losses should be calculated for
the six trading BHCs and the two non-trading BHCs
so that the same losses are not counted under the
global market shock and the counterparty default
scenario component of the supervisory scenarios.
Since the six trading BHCs calculate mark-to-market
losses on their derivative-related counterparty exposures as part of the global market shock, they should
calculate the net stressed loss for derivatives contracts
as follows:
1. Calculate stressed net current exposure (Stressed
Net CE), by applying the global market shock to
current exposure and collateral values on the
as-of date, as defined in the instructions for the
FR Y-14A Counterparty Credit Risk schedule.
2. Subtract the notional amount of any single-name
CDS hedges.37
3. Multiply the result by one minus the recovery
rate.
4. Subtract the stressed CVA loss attributed to the
counterparty. This value is already included in the
aggregate CVA losses reported on the FR Y-14A
Summary template.
5. Exclude from the trading book stress results the
mark-to-market gain related to single- name CDS
realized in step (2) above.
36
37
Any state-owned enterprise backed by the full faith and credit
of an excluded sovereign entity should also be excluded. A
clearing counterparty should be excluded if it is a designated
financial market utility under title VIII of the Dodd-Frank Act,
or, for counterparties not located in the United States, is regulated and supervised in a manner equivalent to a designated
financial market utility.
When reporting gains associated with CVA hedges in column
(c) of the Trading worksheet of the FR Y-14A Summary schedule for all counterparties, BHCs should exclude gains from
name-specific credit default swaps associated with the counterparty default scenario component.
16
CCAR 2014 Instructions
Since the two non-trading BHCs are not subject to
the global market shock, they should calculate the
net stressed loss for derivatives contracts as follows:
losses for derivatives contracts and SFT activities,
taking into account legal netting agreements in place
for transactions with that counterparty.39
1. Calculate Stressed Net CE, by applying the global
market shock to current exposure and collateral
values on the as-of date, as defined in the instructions for the FR Y-14A Counterparty Credit Risk
schedule.
In calculating the losses associated with the counterparty default scenario component of the supervisory
scenarios, BHCs must apply the global market shock
to stress the current exposure, any collateral posted
or received, and, for derivatives-related exposures, the
value of the transaction. BHCs must assume a recovery rate of 10 percent, reflecting significant uncertainty at the time of an unexpected counterparty
default given highly distressed market conditions.
BHCs should not assume any additional recovery in
subsequent quarters of the planning horizon. All
estimated losses from the counterparty default scenario component should be assumed to occur instantaneously and should be reported in the initial quarter of the planning horizon.
2. Subtract the notional amount of any single-name
CDS hedges.
3. Multiply the result by one minus the recovery
rate.
In addition, the two non-trading BHCs will need to
complete parts of the FR Y-14A Counterparty
Schedule.38
All eight BHCs should compute the net stressed loss
for SFTs as follows:
1. Compute Stressed Net CE, as defined in the
instructions for the Securities Finance Transaction Profile by Counterparty worksheet of the
FR Y-14A Counterparty Credit Risk schedule, by
applying the global market shock to any SFT
assets (securities/collateral) exchanged under
repo-style transactions as defined in section 2 of
appendix G to 12 CFR part 225.
2. Multiply Stressed Net CE by one minus the
recovery rate.
To support supervisory estimates of losses arising
from the counterparty default scenario component,
companies will be required to report supplemental
information on their SFT activities.
For all eight BHCs, the total net stressed loss amount
for a counterparty is the sum of the net stressed
38
The information supporting the counterparty default scenario
component in the supervisory stress test will be submitted on
the “1a) Top CPs 95% of Firm CVA,” “1c) Top 20 CPs by Net
CE,” and “5) SFT by Top 20 CP and Agg” worksheets of the
FR Y-14A Counterparty Schedule. Specifically, companies must
submit information for columns “Counterparty ID”; “Industry”; “Country”; “Internal Rating”; “External Rating”; “Gross
CE”; “Stressed Gross CE Federal Reserve scenario (Severely
Adverse)”; “Stressed Gross CE Federal Reserve scenario
(Adverse)”; “Stressed Gross CE BHC scenario”; “Net CE”;
“Stressed Net CE Federal Reserve scenario (Severely Adverse)”;
“Stressed Net CE Federal Reserve scenario (Adverse)”;
“Stressed Net CE BHC scenario”; and “Single Name Credit
Hedges” on worksheet 1a) and worksheet 1c) and for all columns on worksheet 5).
For SFT activities, BHCs must include potential
losses associated with acting as principal for
repurchase/reverse repurchase activities as well as
potential losses that could arise from transactions in
which the company is acting as an agent and provides
default indemnification to a client. A BHC may
account for netting agreements where applicable.
Reinvestment of collateral should be included to the
extent that the reinvested collateral is part of another
SFT agreement.
Pre-provision net revenue (PPNR): PPNR estimates
should be consistent with the economic and financial
environment specified in the relevant scenario. BHCs
must ensure that PPNR projections are explicitly
based on, and directly tied to, balance sheet and
other exposure assumptions used for related loss estimates. In addition, BHCs should apply assumptions
consistent with the scenario and resulting business
strategy when projecting PPNR for fee-based lines of
business (e.g., asset management), while ensuring
that expenses are appropriately taking into account
both the direct effects of the economic environment
(e.g., foreclosure costs) and projected revenues.
Residential mortgage representations and warranties:
As part of PPNR, BHCs must estimate losses associated with requests by mortgage investors, including
39
All exposures within a consolidated organization, including to
any subsidiaries and related companies, will be treated as exposure to a single counterparty. However, losses should first be
computed at the subsidiary or related company level, accounting for legal netting agreements at that level, and then aggregated to the consolidated organization.
November 1, 2013
both government-sponsored enterprises and privatelabel securities holders, to repurchase loans deemed
to have breached representations and warranties, or
with investor litigation that broadly seeks compensation from BHCs for losses. BHCs should consider
not only how the macro scenarios could affect losses
from repurchased loans, but also a range of legal process outcomes, including worse-than-expected resolutions of the various contract claims or threatened or
pending litigation against the BHC and against various industry participants. BHCs should provide
appropriate support of the adverse litigation
expense-related outcomes considered in their
analysis.
Mortgage-servicing rights (MSR): All revenue and
expenses related to MSRs and the associated noninterest income and non-interest expense line items
must be reported on the PPNR schedules. Trading
BHCs should not report changes in value of the
MSR asset or hedges as trading losses resulting from
the global market shock. Therefore, if derivative or
other MSR hedges are placed in the trading book for
FR Y-9C purposes and in alignment with Generally
Accepted Accounting Principles, these hedges should
not be stressed with the global market shock for
CCAR purposes. Also, any BHCs that have adopted
fair-value accounting for all or part of the MSR must
not subject the MSR to the global market shock of
the supervisory scenarios.
Operational-risk losses: Projections of losses arising
from inadequate or failed internal processes, people
and systems, or from external events must be
reported by the BHC as operational-risk losses, a
component of PPNR. BHCs should carefully evaluate the best way to capture operational-risk events,
including the possibility of support for BHCsponsored entities and potential charges related to
legal reserves and provisions, in their loss projections.
For cases in which BHCs cannot identify statistically
significant correlations between macroeconomic factors and operational-risk losses, they are not required
to use such an approach for estimating operationalrisk losses under stress. In such cases, BHCs may use
an alternative approach to generate losses for the
BHC stress scenario and both supervisory stress
scenarios.
Trading revenues in PPNR: All BHCs are expected to
project PPNR, including trading-related revenues,
conditional on the specifications of the assumed
macroeconomic scenario (supervisory baseline,
adverse, and severely adverse and BHC baseline and
17
stress). In this regard, all BHCs with trading activities and private equity investments, including those
BHCs that are not required to apply the global market shock or the counterparty default scenario component, must estimate any potential profit and loss
impact that these positions might experience under
the macroeconomic scenario. Estimated impacts
should include those stemming from potential
defaults on credit-sensitive positions held in the trading account and from counterparty credit exposures,
and valuation declines (and recoveries specific to
those declines) on loans, securities and other trading
or MTM positions, and private equity investments
(regardless of the portfolio in which a private equity
position is booked). Private equity-related loss estimates should be broken out from other trading or
MTM loss and should include consideration of
drawdowns against commitments.
In making these projections, BHCs should demonstrate that their historical data selection and general
approach is credible and applicable for the assumed
macroeconomic scenario. BHCs should not assume
that trading-related PPNR could never fall below historical levels.
Under the supervisory scenarios, the six trading
BHCs should make these projections without consideration of any MTM losses on trading BHCs’ portfolios that result from the global market shock. The
MTM losses resulting from the global market shock
should be treated as separate, one-time losses that
occur in the initial quarter of the planning horizon
(e.g., the fourth quarter of 2013 for CCAR 2014).
Therefore, BHCs subject to the global market shock
should not assume any interaction between the global
market shock and projections of PPNR in the form
of management actions (such as expense cuts) that
would be taken in light of the global market shock to
the trading portfolio or recoveries of the losses
resulting from the global market shock over the planning horizon.
Similarly, the eight BHCs that are subject to the
counterparty default scenario component should
treat any losses from the component as separate, onetime losses that occur in the initial quarter of the
planning horizon and assume no interaction between
the counterparty default scenario component and
projection of PPNR.
Regulatory capital transitions: In the transition plans,
BHCs must include estimates of the composition and
levels of regulatory capital, RWAs (based on the stan-
18
CCAR 2014 Instructions
dardized approach and advanced approaches, where
applicable), and leverage ratio exposures used to calculate regulatory capital ratios under the supervisory
baseline scenario. The estimates must address the
capital conservation buffer and any systemically
important financial institution—or SIFI—surcharge
that may be required under the revised regulatory
capital rule on a fully phased-in basis. Each BHC’s
submission should include supporting documentation on all material planned actions that the BHC
intends to pursue in order to meet the minimum
regulatory capital ratios per the revised regulatory
capital rule, including, but not limited to, the run-off
or sale of existing portfolio(s), the issuance of regulatory capital instruments, and other strategic corporate actions. Where applicable, each BHC should
include in its capital plan its best estimate of the SIFI
surcharge to which the BHC expects to be subject,
along with an explanation for its estimate, as set forth
by guidance in the Basel Committee’s SIFI surcharge
framework.
Regulatory capital: BHCs are to provide data on the
balances of regulatory capital instruments under current U.S. capital adequacy guidelines (and the revised
regulatory capital rule, for quarters in which they are
subject to the revised regulatory capital rule), aggregated by instrument type based on actual balances as
of September 30 of the current calendar year and
projected balances as of each quarter end through
the remaining planning horizon.40 BHCs are to
report information both on a notional basis and on
the basis of the dollar amount included in regulatory
capital.
Supporting Documentation for
Analyses Used in Capital Plans
Documentation of risk-identification practices: Each
capital plan submission must include documentation
outlining the risk-identification process the BHC uses
to support the BHC-wide stress testing required in
the capital plans. As previously noted, the capital
planning process should consider all potential firmwide risks. An assessment of the comprehensiveness
of risk identification is a critical aspect of the supervisory assessment of CAP. An evaluation of the
adequacy of a BHC’s process for identifying the full
range of relevant risks, given the BHC’s exposures
40
See Regulatory Capital Rules, note 7; 12 CFR part 225, appendices A, D, E, and G; see also section 225.8(d) of the capital
plan rule.
and business mix, will be a particular area of supervisory focus.
Documentation of internal stress testing methodologies: BHCs must include in their capital plan submissions thorough documentation that describes key
methodologies and assumptions for performing stress
testing on their portfolios, business, and performance
drivers. Documentation should clearly describe the
model-development process, the derivation of outcomes, and validation procedures, as well as assumptions concerning the evolution of balance sheet and
RWAs under the scenarios, changing business strategies, and other impacts to a BHC’s risk profile. Supporting documentation should clearly describe any
known model weaknesses and how such information
is factored into the capital plan. Senior management
should provide its board of directors with sufficient
information to facilitate the board’s full understanding of the stress testing analytics used by the BHC for
capital planning purposes, including any identified
weaknesses that increase uncertainty in the estimation process.
Assumptions and approaches: BHCs must provide
credible support for BHC-specific assumptions,
including any known weaknesses in the translation of
assumptions into loss and resource estimates. For
example, an overreliance on past patterns of credit
migration (the basis for roll rate and ratings transition models) may be a weakness when considering
stress scenarios. BHCs should demonstrate that their
approaches are clearly conditioned on the scenarios
being used. While judgment is an essential part of
risk measurement and risk management, including
for loss-estimation purposes, BHCs should not be
overly reliant on judgment to prepare their loss estimates and should provide documentation or evidence
of transparency and discipline around the process.
Any management judgment applied should be
adequately supported and in line with scenario conditions and should be consistently conservative in the
assumptions made to arrive at loss rates. There also
should be appropriate challenge of assumptions by
senior management and the board of directors.
Documentation related to the BHC scenario assumptions: BHCs should include appropriate documentation related to their individual approach to the BHC
baseline and BHC stress scenarios in their capital
plan submission. As outlined in the FR Y-14A Scenario schedule instructions, BHCs are required to
provide detailed supporting documentation and a
listing of all key variables assumed for each scenario.
November 1, 2013
The Scenario schedule must be completed, and the
variables listed should be comprehensive and appropriate for each BHC. In addition, BHCs should provide detailed documentation describing all methodologies and key assumptions impacting the BHCs’
loss and PPNR estimates. The supporting documentation should describe how the BHC stress scenarios
address the BHC’s particular vulnerabilities. Supervisors will focus particular attention on a BHC’s ability
to adequately support the approach and methodologies used for its BHC scenarios.
Validation and independent review: In addition to
being properly documented, models employed by
BHCs should be independently validated or otherwise reviewed in line with model risk-management
expectations presented in existing supervisory guidance. While use of existing risk-measurement models
and processes provides a useful reference point for
considering stress scenario potential loss estimates,
BHCs should consider whether these processes generate outputs that are relevant in a stressful scenario.
Use of such models may need to be supplemented
with other data elements and alternative methodologies. It is critical that BHCs assess the vulnerability of
their models to error, understand any other limitations, and consider the risk to the BHC should estimates based on those models prove materially inaccurate.41
Description of All Capital Actions
Assumed over the Planning Horizon
A BHC’s capital plan must describe all capital
actions assumed over the planning horizon. As
detailed in the capital plan rule, a capital action is any
issuance of a debt or equity capital instrument, any
capital distribution, and any similar action that the
Federal Reserve determines could impact a BHC’s
consolidated capital. A capital distribution is a
redemption or repurchase of any debt or equity capital instrument, a payment of common or preferred
stock dividends, a payment that may be temporarily
or permanently suspended by the issuer on any
instrument that is eligible for inclusion in the
numerator of any minimum regulatory capital ratio,
and any similar transaction that the Federal Reserve
determines to be in substance a distribution of
capital.
41
See SR letter 11-7, “Guidance on Model Risk Management,”
www.federalreserve.gov/bankinforeg/srletters/sr1107.htm, for
additional information regarding model validation.
19
To meet the requirements of the DFA stress test rule,
a BHC must calculate its pro forma capital ratios
using the following assumptions regarding its capital
actions over the planning horizon for each of the
supervisory baseline scenario, the supervisory
adverse scenario, and the supervisory severely
adverse scenario:
• For the initial quarter of the planning horizon, the
BHC must take into account its actual capital
actions taken throughout the quarter.
• For each of the second through ninth quarters of
the planning horizon, the BHC must include in the
projections of capital
—common stock dividends equal to the quarterly
average dollar amount of common stock dividends that the company paid in the previous
year (that is, the initial quarter of the planning
horizon and the preceding three calendar
quarters);
—payments on any other instrument that is eligible
for inclusion in the numerator of a regulatory
capital ratio equal to the stated dividend, interest, or principal due on such instrument during
the quarter; and
—an assumption of no redemption or repurchase
of any capital instrument that is eligible for
inclusion in the numerator of a regulatory capital ratio.42
As part of the CCAR capital plan submission, BHCs
should calculate pro forma capital ratios using their
planned capital actions over the planning horizon
under the BHC baseline scenario and the alternative
capital actions projected to be taken under the BHC
stress scenario. With respect to the planned capital
actions under the BHC baseline scenario,
1. for the initial quarter of the planning horizon, the
BHC must take into account the actual capital
actions taken during that quarter; and
2. for each of the second through ninth quarters of
the planning horizon, the BHC must include any
capital actions proposed in its capital plan.
In the second quarter of the planning horizon (i.e.,
the first quarter of 2014), a BHC should include, for
42
12 CFR 252.146(b). For similar reasons, a company should
assume that it will not issue any new common stock, preferred
stock, or other instrument that would be included in regulatory
capital in the second through ninth quarters of the planning
horizon, except for common stock issuances associated with
expensed employee compensation.
20
CCAR 2014 Instructions
Figure 1. Seven principles of an effective capital adequacy process
Principle 1: Sound foundational risk management
The BHC has a sound risk-measurement and risk-management infrastructure that supports the identification, measurement, assessment,
and control of all material risks arising from its exposures and business activities.
Principle 2: Effective loss-estimation methodologies
The BHC has effective processes for translating risk measures into estimates of potential losses over a range of stressful scenarios and
environments and for aggregating those estimated losses across the BHC.
Principle 3: Solid resource-estimation methodologies
The BHC has a clear definition of available capital resources and an effective process for estimating available capital resources (including
any projected revenues) over the same range of stressful scenarios and environments used for estimating losses.
Principle 4: Sufficient capital adequacy impact assessment
The BHC has processes for bringing together estimates of losses and capital resources to assess the combined impact on capital
adequacy in relation to the BHC’s stated goals for the level and composition of capital.
Principle 5: Comprehensive capital policy and capital planning
The BHC has a comprehensive capital policy and robust capital planning practices for establishing capital goals, determining appropriate
capital levels and composition of capital, making decisions about capital actions, and maintaining capital contingency plans.
Principle 6: Robust internal controls
The BHC has robust internal controls governing capital adequacy process components, including policies and procedures; change control;
model validation and independent review; comprehensive documentation; and review by internal audit.
Principle 7: Effective governance
The BHC has effective board and senior management oversight of the CAP, including periodic review of the BHC’s risk infrastructure and
loss- and resource-estimation methodologies; evaluation of capital goals; assessment of the appropriateness of stressful scenarios
considered; regular review of any limitations and uncertainties in all aspects of the CAP; and approval of capital decisions.
purposes of CCAR, capital actions in an amount
that is no greater than the amount in its most
recently approved capital plan. For net repurchases in
the second quarter of the planning horizon, the BHC
should submit an amount not greater than the
unused portion of cumulative net repurchases under
its most recently approved capital plan, where cumulative for CCAR 2014 is defined as the period beginning in the second quarter of 2013 and ending in the
first quarter of 2014.
With respect to a BHC’s projections under the supervisory baseline, adverse, and severely adverse scenarios, the BHC must calculate two sets of pro forma
capital ratios on the two capital worksheets within
the FR Y-14A Summary schedule using (1) the prescribed capital actions under the DFA stress test rule,
and (2) the BHC’s planned capital actions in the
BHC baseline scenario. As described below, the
planned capital actions under consideration by the
Federal Reserve in its supervisory stress test under
the capital plan rule will be those proposed in the
BHC baseline scenario.
Expected Changes to Business Plans
Affecting Capital Adequacy
or Funding
Each BHC should include in its capital plan a discussion of any expected changes to the BHC’s business
plan that are likely to have a material impact on the
BHC’s capital adequacy and funding profile.43
Examples of changes to a business plan that may
have a material impact could include a proposed
merger or divestiture, changes in key business strategies, or significant investments. In this discussion, the
43
A BHC that incorporates the effect of changes to its business
plan that are likely to have a material impact on the BHC’s capital adequacy and funding profile may be required to submit
additional data.
November 1, 2013
company should consider not just the impacts of
these expected changes, but also the potential adverse
consequences should the actions not result in the
planned changes—e.g., a merger plan falls through, a
change in business strategy is not achieved, or there is
a loss on the planned significant investment.
Supervisory Expectations for a
BHC’s Capital Adequacy Process
An important component of a BHC’s capital plan is
a description of the BHC’s process for assessing capital adequacy.44 As discussed in supervisory guidance,
a BHC’s CAP should have as its foundation a full
44
See Board of Governors of the Federal Reserve System (2013),
Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Current Range of Practice, (Washington:
21
understanding of the risks emanating from its exposures and business activities, as well as stress testing
analytics to ensure that it holds capital corresponding
to those risks to maintain sufficient capital to maintain operations across the planning horizon. The
detailed description of a company’s CAP should
include a discussion of how, under stressful conditions, the BHC will maintain capital commensurate
with its risks—above the minimum regulatory capital
ratios—and serve as a source of strength to its
depository institution subsidiaries. The full range of
supervisory expectations, including governance and
oversight expectations to complement the CAP
aspects mentioned above, are summarized in figure 1,
“Seven principles of an effective capital adequacy
process.”
Board of Governors, August), www.federalreserve.gov/
bankinforeg/bcreg20130819a1.pdf.
23
Supervisory Stress Testing and
Capital Plan Assessments
To support its assessment of the capital plans, the
Federal Reserve will review the supporting analyses
in a BHC’s capital plan, including the BHC’s own
stress test results, and will generate supervisory estimates of losses; revenues; loan-loss reserves; balance
sheet components and RWAs; and pro forma, poststress capital ratios using internally developed supervisory models and assumptions wherever possible.
Supervisory models and assumptions will be applied
in a consistent manner across all BHCs. Where it may
not be feasible to develop results directly through the
use of supervisory models, the Federal Reserve may
incorporate into its supervisory estimates one or
more of the following: (1) BHC estimates, reviewed
and adjusted (where applicable) by the Federal
Reserve to ensure the scenario was applied as specified and that the BHC’s assumptions of potential
losses and earnings reflect a credible and conservative
translation of the impacts from the stress scenario;
(2) third-party models; and (3) simple decision rules
using conservative assumptions consistently applied
across all BHCs.
Quantitative Assessments
The various types of quantitative assessments that
the Federal Reserve expects to consider are described
in figure 2.
Pro Forma Capital Ratios
As part of CCAR, the Federal Reserve will use
BHCs’ planned capital actions in the BHC baseline
scenario as the actions that are subject to supervisory
evaluation in the baseline scenario and in the supervisory adverse and severely adverse scenarios. In other
words, the Federal Reserve will in part be assessing
whether a BHC would be capable of continuing to
meet minimum capital requirements (the leverage,
tier 1 risk-based, common equity tier 1 risk-based,
and total risk-based capital ratios) and a tier 1 common capital ratio of at least 5 percent throughout the
planning horizon even if adverse or severely adverse
stress conditions emerged and the BHC did not
reduce planned capital distributions.
A quantitative assessment of the appropriateness of
planned capital actions will also be evaluated based
on its common dividend payout ratio (common dividends relative to net income available to common
shareholders) in the baseline scenarios, and its projected path to compliance with the revised regulatory
capital rule under the supervisory baseline scenario
as the revised regulatory capital framework is
phased in.
Changes to proposed capital distributions after the
initial submission may require submission of a
revised plan in a subsequent quarter.45 The Federal
Reserve will use the dollar amount of distributions
contained in a BHC’s FR Y-14A when assessing
capital plans. The Federal Reserve’s decision to
object, or issue a notice of non-objection, to a capital
plan will be specific to each BHC’s planned capital
actions.
Common Dividend Payouts
The Federal Reserve expects that capital plans will
reflect conservative common dividend payout ratios.
In particular, requests that imply common dividend
payout ratios above 30 percent of projected after-tax
net income available to common shareholders in
either the BHC baseline or supervisory baseline will
receive particularly close scrutiny.
Regulatory Capital Rule Transition Plans
As part of CCAR, the Federal Reserve will continue
to evaluate whether the proposed capital actions are
appropriate in light of the BHC’s plans to meet the
requirements of the revised regulatory capital rule on
a fully phased-in basis. As part of its capital plan
submission, a BHC should provide a transition plan
45
See sections 225.8(d)(4) and (f) of the capital plan rule. 12 CFR
225.8(d)(4) and (f).
24
CCAR 2014 Instructions
Figure 2. Quantitative assessments of capital actions
Pro forma capital ratios
Common dividend payout ratio
Regulatory capital transition
BHC stress
Alternative capital actions
Supervisory adverse
Planned capital actions
DFA stress test capital actions
Supervisory severely adverse
Planned capital actions
DFA stress test capital actions
BHC baseline*
Planned capital actions
Supervisory baseline*
Planned capital actions
DFA stress test capital actions
Note: Each box indicates a distinct scenario that will be submitted by each BHC. Planned capital actions are estimated by each BHC using the BHC baseline scenario and the
alternative capital actions are estimated under the BHC’s stress scenario in accordance with the BHC’s internal capital policies.
* If a BHC determines the supervisory baseline scenario to be appropriate for their own BHC baseline, the BHC may submit identical FR Y-14A Summary schedules with the
exception of the capital worksheets noted above. All BHCs must complete two capital worksheets for the supervisory baseline and supervisory severely adverse scenario.
that includes pro forma estimates under baseline conditions of the BHC’s regulatory risk-based capital
and leverage ratios under the revised regulatory capital rule. As stated in the September 2010 Group of
Governors and Heads of Supervision agreements,46
BHCs that meet the minimum ratio requirement during the transition period per the revised regulatory
capital rule, but that remain below the 7 percent tier 1
common equity target (minimum plus conservation
buffer), will be expected to maintain prudent
earnings-retention policies with a view to meeting the
conservation buffer under the time frame described
in the revised capital framework.47
In July 2013, the Basel Committee on Banking
Supervision published its updated methodology for
assessing a higher loss-absorbency requirement for
global systemically important banks (SIFI surcharge).48 Each BHC’s regulatory capital transition
plan should incorporate management’s best estimate
of the likely SIFI surcharge that would be assessed
under this methodology (and any updates published
since that time) and a description of how this estimate was derived. The Federal Reserve expects that
BHCs will demonstrate with great assurance that,
inclusive of a SIFI surcharge, they can achieve the
46
47
48
See Basel Committee on Banking Supervision (2010), “Group
of Governors and Heads of Supervision Announce Higher
Global Minimum Capital Standards,” press release, September 12, www.bis.org/press/p100912.pdf.
See Regulatory Capital Rules, note 7.
See Basel Committee on Banking Supervision (2013), “Global
Systemically Important Banks: Updated Assessment Methodology and the Higher Loss Absorbency Requirement,” rules text
(Basel: BCBS, July), www.bis.org/publ/bcbs255.htm.
required ratios readily and without difficulty, inclusive of any planned capital actions.
A BHC should, through its capital plan, demonstrate
an ability to maintain no less than steady progress
along a path between its existing capital ratios based
upon the revised regulatory capital rule and the fully
phased-in requirements in 2019 (see figure 3). The
Federal Reserve will closely scrutinize plans that fall
short of this supervisory expectation. Some BHCs
may exceed the transition targets over the near term,
but not yet meet the fully phased-in targets. Those
BHCs are expected to submit plans reflecting steady
accretion of capital at a sufficient pace to demonstrate continual progress toward full compliance with
the revised regulatory capital rule on a fully
phased-in basis.
The Federal Reserve expects that any BHC performance projections that suggest that ratios would fall
below the regulatory minimums at any point over the
projection period would be accompanied by proposed actions that reflect affirmative steps to improve
the BHC’s capital ratios, including actions such as
external capital raises, to provide great assurance that
the BHC will meet the revised regulatory minimums
as they phase in.
Qualitative Assessments
Qualitative assessments are also a critical component
of the CCAR review. Even if the supervisory stress
test for a given BHC results in a post-stress tier 1
common capital ratio exceeding 5 percent and other
November 1, 2013
25
Figure 3. Regulatory capital transitions evaluation path
Zone 1
Zone 2
Zone 3
Zone 4
Q3 2013
Q4 2013
BHC projected ratio
Q4 2014
Q4 2015
Q4 2016
Fully phased-in target
Q4 2017
Steady progress
Q4 2018
Q1 2019
Transitional target
Note: Zone 1 indicates that the BHC already meets the fully phased-in target ratios (common equity tier 1, tier 1 risk-based, tier 1 leverage, supplemental leverage) over the
entire forecasted period (i.e., Q3 2013 to Q4 2018).
Zone 2 indicates that the BHC meets the steady progress path.
Zone 3 indicates that the BHC meets the transitional targets, but without steady progress.
Zone 4 indicates that the BHC does not meet the transitional targets.
regulatory capital ratios above the minimums, the
Federal Reserve could nonetheless object to that
BHC’s capital plan for other reasons. These reasons
include the following:
• There are outstanding material unresolved supervisory issues.
• Assumptions and analyses underlying the BHC’s
capital plan are inadequate.
• The BHC’s capital adequacy process, including the
risk-measurement and risk-management practices
supporting this process, as well as the governance
and controls around these practices, are not sufficiently robust.
• The CCAR assessment results in a determination
that a BHC’s CAP or proposed capital distributions would otherwise constitute an unsafe or
unsound practice, or would violate any law, regula-
tion, Board order, directive, or any condition
imposed by, or written agreement with, the
Board.49
As noted previously, the Federal Reserve has differing expectations for BHCs of different sizes, scope of
operations, activities, and systemic importance in
various aspects of capital planning. For purposes of
capital planning, the Federal Reserve expects the
largest, most complex BHCs to have the most sophisticated, comprehensive and robust capital planning
practices. In addition, the Federal Reserve recognizes
the challenges facing BHCs that are new to CCAR
and recognizes that these BHCs will continue to
develop and enhance their capital planning systems
and processes to meet supervisory expectations.
49
See section 225.8(e)(2)(ii) of the capital plan rule. 12 CFR
225.8(e)(2)(ii).
27
Federal Reserve Responses to Planned
Capital Actions
After performing appropriate analysis, the Federal
Reserve will, by March 31, either object or provide a
notice of non-objection to the submitted capital plan
based on assessments of the comprehensiveness and
quality of the plan; pro forma, post-stress capital
ratios under the scenarios; and transition plan under
the revised regulatory capital framework. The Federal
Reserve could object in whole or in part to the proposed capital actions in the plans. The supervisory
assessment will be conducted across the entire ninequarter planning horizon; however, the object or
non-object decision applies specifically to capital
actions during the four quarters beginning with the
second quarter of the following calendar year. For
CCAR 2014, this will apply to the capital actions
from the second quarter of 2014 through the first
quarter of 2015.
Submissions that are late, incomplete, or otherwise
unclear could result in an objection to the plan and a
mandatory resubmission of a new plan, which may
not be reviewed until the following quarter. Upon the
Federal Reserve’s objection to a capital plan, the
BHC may not make any capital distribution other
than those capital distributions with respect to which
the Federal Reserve has indicated in writing its nonobjection.50
Based on a review of a BHC’s capital plan, supporting information, and data submissions, the Federal
Reserve may require additional supporting information or analysis from a BHC, or require it to revise
and resubmit its plan. Any of these may also result in
the delay of evaluation of capital actions until a subsequent calendar quarter.
It is important to note that the CAP described in the
capital plan rule is broadly equivalent to an internal
capital adequacy assessment process (ICAAP) under
the Federal Reserve’s advanced approaches capital
50
See section 225.8(e)(2)(iv) of the capital plan rule. 12 CFR
225.8(e)(2)(iv).
guidelines.51 Accordingly, the seven principles articulated in the Capital Planning at Large Bank Holding
Companies: Supervisory Expectations and Range of
Current Practice document are consistent with the
U.S. federal banking agencies’ supervisory guidance
relating to the ICAAP under the advanced
approaches guidelines. If the Federal Reserve identifies substantial weaknesses in a BHC’s CAP, that
finding on its own could justify an objection to a
BHC’s capital plan. However, a non-objection to a
BHC’s capital plan does not necessarily mean that a
BHC is considered to have a fully satisfactory CAP.
Limited Adjustments to Planned
Capital Actions
Upon completion of the quantitative and qualitative
assessments of BHCs’ capital plans, but before the
disclosure of the final CCAR results, the Federal
Reserve will provide each BHC with the results of the
post-stress capital analysis for its BHC, and each
BHC will have an opportunity to make a one-time
adjustment to planned capital distributions. The only
adjustment that will be considered is a reduction
from the initially planned capital distributions. The
Federal Reserve’s final decision to object or not
object will be informed by the adjusted capital distribution plans.
Disclosure of Supervisory
Stress Test Results
At the end of the CCAR process, the Federal Reserve
intends to publish results based on its DFA supervisory stress tests under both the supervisory adverse
and severely adverse scenarios. The Federal Reserve
will provide the detailed results of supervisory stress
tests for each BHC, including stressed losses and revenues, and the post-stress capital ratios based on the
capital action assumptions required under the DFA
51
73 Fed. Reg. 44620 (July 31, 2008).
28
CCAR 2014 Instructions
stress test rules, along with an overview of methodologies used for supervisory stress tests. (See appendix A for the format that will be used to publish these
data.)
In its disclosure of the CCAR results, the Federal
Reserve will also publish the BHC-specific post-stress
pro forma regulatory capital ratios (leverage, common equity tier 1 risk-based, tier 1 risk-based, and
total risk-based capital ratios) and the tier 1 common
ratio estimated in the adverse and severely adverse
scenarios. These results will be derived using the
planned capital actions as provided under the BHC
baseline scenario. The disclosed information will
include minimum values of these ratios over the planning horizon, using the originally submitted planned
capital actions under the baseline scenario and any
adjusted capital distributions in the final capital
plans, where applicable. (See appendix B for the format that will be used to publish these data.)
Both sets of results, with the overview of methodologies and other information related to supervisory
stress tests and CCAR, are expected to be published
by March 31, 2014.
Resubmissions
If a BHC receives an objection to its capital plan, it
must resubmit its plan within 30 days or such longer
period as the Federal Reserve determines appropriate. The Federal Reserve at all times retains the ability to ultimately object to capital distributions in
future quarters if a BHC exhibits a material decline
in performance or financial condition, or if a deteriorating outlook materially increases BHC-specific
risks.
As detailed in the capital plan rule, a BHC must
update and resubmit its capital plan if it determines
there has been or will be a material change in the
BHC’s risk profile (including a material change in its
business strategy or any material risk exposures),
financial condition, or corporate structure since the
BHC adopted the capital plan. Further, the Federal
Reserve may direct a BHC to revise and resubmit its
capital plan for a number of reasons, including if a
stress scenario developed by a BHC is not appropriate to its business model and portfolios or if changes
in financial markets or the macroeconomic outlook
that could have a material impact on a BHC’s risk
profile and financial condition requires the use of
updated scenarios.
The capital plan rule provides that a BHC must
request prior approval of a capital distribution if the
“dollar amount of the capital distribution will exceed
the amount described in the capital plan for which a
non-objection was issued” unless an exception (i.e.,
less than 1 percent of tier 1 capital) is met.52 In particular, a BHC should notify the Federal Reserve as
early as possible before issuing or redeeming any
capital instrument that counts as regulatory capital
and that was not included in its capital plan. Any
capital distribution associated with the issuance that
was not identified in the capital plan is subject to the
requirements of section 225.8(f) of the capital plan
rule (12 CFR 225.8(f)). The Federal Reserve will
examine performance relative to the initial projections and the rationale for the request. Any such
request for prior approval should incorporate a fully
updated capital plan, including relevant FR Y-14
schedules reflecting updated baseline and supervisory
stress scenarios provided by the Federal Reserve,
unless otherwise directed by the Federal Reserve.
Correspondence Related to CCAR
All correspondence and questions regarding this
exercise and related issues should be communicated
to a secure mailbox, the address to which will be provided directly to the BHCs participating in CCAR
2014. Questions will be catalogued and, where appropriate, written responses (removing any BHC identifying information) will be provided to all BHCs via
secure e-mail. Any BHC-specific questions submitted
to the secure mailbox will be addressed only with the
relevant BHC via the same secure mailbox. If
needed, meetings may be scheduled to discuss submitted questions in more detail; however, only those
responses that come through the secure mailbox will
be considered official.
52
See section 225.8(f) of the capital plan rule. 12 CFR 225.8(f).
29
Appendix A: Templates for Dodd-Frank Act
Stress Testing Results 2014
This appendix provides the format that the Federal Reserve will use to disclose the results of the supervisory
stress test in accordance with the Dodd-Frank Act stress test rules.
Tables begin on next page.
30
CCAR 2014 Instructions
Table A.1. All bank holding companies
Projected minimum tier 1 common ratio, Q4 2013 to Q4 2015
Federal Reserve estimates: Severely adverse scenario
Bank holding company
Stressed Ratios with DFA Stress Testing
Capital Action Assumptions
Ally Financial Inc.
American Express Company
Bank of America Corporation
The Bank of New York Mellon Corporation
BB&T Corporation
BBVA Compass Bancshares, Inc.
BMO Financial Corp.
Capital One Financial Corporation
Citigroup Inc.
Comerica Incorporated
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
Northern Trust Corporation
The PNC Financial Services Group, Inc.
RBS Citizens Financial Group, Inc.
Regions Financial Corporation
Santander Holdings USA, Inc.
State Street Corporation
SunTrust Banks, Inc.
U.S. Bancorp
UnionBanCal Corporation
Wells Fargo & Co.
Zions Bancorporation
Note: The capital ratios are calculated using capital action assumptions provided within the Dodd-Frank Act stress testing rule. These projections represent hypothetical
estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital ratios. The minimum stressed ratios (%) are the
lowest quarterly ratios from Q4 2013 to Q4 2015 under the severely adverse scenario.
Source: Federal Reserve estimates in the severely adverse scenario. Stressed ratios with Dodd-Frank Act capital action assumptions through Q4 2015.
November 1, 2013
31
Table A.2. All bank holding companies
Projected minimum tier 1 common ratio, Q4 2013 to Q4 2015
Federal Reserve estimates: Adverse scenario
Bank holding company
Stressed Ratios with DFA Stress Testing
Capital Action Assumptions
Ally Financial Inc.
American Express Company
Bank of America Corporation
The Bank of New York Mellon Corporation
BB&T Corporation
BBVA Compass Bancshares, Inc.
BMO Financial Corp.
Capital One Financial Corporation
Citigroup Inc.
Comerica Incorporated
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
Northern Trust Corporation
The PNC Financial Services Group, Inc.
RBS Citizens Financial Group, Inc.
Regions Financial Corporation
Santander Holdings USA, Inc.
State Street Corporation
SunTrust Banks, Inc.
U.S. Bancorp
UnionBanCal Corporation
Wells Fargo & Co.
Zions Bancorporation
Note: The capital ratios are calculated using capital action assumptions provided within the Dodd-Frank Act stress testing rule. These projections represent hypothetical
estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital ratios. The minimum stressed ratios (%) are the
lowest quarterly ratios from Q4 2013 to Q4 2015 under the adverse scenario.
Source: Federal Reserve estimates in the adverse scenario. Stressed ratios with Dodd-Frank Act capital action assumptions through Q4 2015.
32
CCAR 2014 Instructions
Table A.3. BHC XYZ, Inc.
Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income
before taxes, and loan losses
Federal Reserve estimates: Severely adverse scenario
Projected stressed capital ratios through Q4 2015
Actual
Q3 2013
Tier 1 common ratio (%)
Common equity tier 1 capital ratio (%)2
Tier 1 risk-based capital ratio (%)
Total risk-based capital ratio (%)
Tier 1 leverage ratio (%)
Actual Q3 2013 and projected Q4 2015 risk-weighted
assets
Stressed capital ratios1
Projected Q4 2015
Ending
Minimum
Actual
Q3 2013
n/a
1
The capital ratios are calculated using capital action assumptions provided
within the Dodd-Frank Act stress testing rule. These projections represent
hypothetical estimates that involve an economic outcome that is more adverse
than expected. These estimates are not forecasts of expected losses, revenues,
net income before taxes, or capital ratios. The minimum capital ratio presented
is for the period Q4 2013 to Q4 2015.
2
Advanced approaches bank holding companies (BHCs) are subject to the
common equity tier 1 ratio for each quarter of 2014. All bank holding
companies are subject to the common equity tier 1 ratio for each quarter of
2015. For purposes of this stress test cycle, an advanced approaches BHC
includes any BHC that has consolidated assets greater than or equal to
$250 billion or total consolidated on-balance sheet foreign exposure of at least
$10 billion as of December 31, 2013. See 12 CFR 217.100(b)(1); 12 CFR part
225, appendix G, section 1(b). Other BHCs include any BHC that is subject to
12 CFR 225.8 and is not an advanced approaches BHC.
n/a Not applicable.
Projected loan losses, by type of loan, Q4 2013–Q4 2015
Billions of
dollars
Portfolio loss
rates (%)1
Loan losses
First-lien mortgages, domestic
Junior liens and HELOCs, domestic
Commercial and industrial2
Commercial real estate, domestic
Credit cards
Other consumer3
Other loans4
3
4
Average loan balances used to calculate portfolio loss rates exclude loans held
for sale and loans held for investment under the fair-value option, 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.
For each quarter in 2014, risk-weighted assets are calculated using the current
general risk-based capital approach. For each quarter in 2015, risk-weighted
assets are calculated under the Basel III standardized capital risk-based
approach, except for the tier 1 common ratio which uses the general
risk-based capital approach for all quarters.
Projected losses, revenue, and net income before taxes
through Q4 2015
Pre-provision net revenue2
Other revenue3
less
Provisions
Realized losses/gains on securities (AFS/HTM)
Trading and counterparty losses4
Other losses/gains5
equals
Net income before taxes
Memo items
Other comprehensive income6
Other effects on capital
AOCI included in capital (billions of dollars)7
1
2
3
4
2
Basel III
standardized
approach
Risk-weighted assets
(billions of dollars)1
1
1
Current
general
approach
5
6
7
Billions of
dollars
Percent of
average assets1
Q4 2014
Q4 2015
Average assets is the nine-quarter average of total assets.
Pre-provision net revenue includes losses from operational-risk events,
mortgage repurchase expenses, and other real estate owned (OREO) costs.
Other revenue includes one-time income and (expense) items not included in
pre-provision net revenue.
Trading and counterparty losses include mark-to-market and credit valuation
adjustments (CVA) losses and losses arising from the counterparty default
scenario component applied to derivatives, securities lending, and repurchase
agreement activities.
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.
Other comprehensive income is only calculated for advanced approaches
BHCs, as only those BHCs include accumulated other comprehensive income
(AOCI) in calculations of regulatory capital. Other comprehensive income
includes incremental unrealized losses/gains on AFS securities and on any
HTM securities that have experienced other than temporary impairment.
For advanced approaches BHCs, 20 percent of AOCI is included in capital
calculations for 2014 and 40 percent of AOCI is included in capital calculations
for 2015. For the purposes of this stress test cycle, non-advanced approaches
BHCs are assumed to opt-out of including AOCI in their capital calculations.
November 1, 2013
33
Table A.4. BHC XYZ, Inc.
Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income
before taxes, and loan losses
Federal Reserve estimates: Adverse scenario
Projected stressed capital ratios through Q4 2015
Actual
Q3 2013
Tier 1 common ratio (%)
Common equity tier 1 capital ratio (%)2
Tier 1 risk-based capital ratio (%)
Total risk-based capital ratio (%)
Tier 1 leverage ratio (%)
Actual Q3 2013 and projected Q4 2015 risk-weighted
assets
Stressed capital ratios1
Projected Q4 2015
Ending
Minimum
Actual
Q3 2013
n/a
1
The capital ratios are calculated using capital action assumptions provided
within the Dodd-Frank Act stress testing rule. These projections represent
hypothetical estimates that involve an economic outcome that is more adverse
than expected. These estimates are not forecasts of expected losses, revenues,
net income before taxes, or capital ratios. The minimum capital ratio presented
is for the period Q4 2013 to Q4 2015.
2
Advanced approaches bank holding companies (BHCs) are subject to the
common equity tier 1 ratio for each quarter of 2014. All bank holding
companies are subject to the common equity tier 1 ratio for each quarter of
2015. For purposes of this stress test cycle, an advanced approaches BHC
includes any BHC that has consolidated assets greater than or equal to
$250 billion or total consolidated on-balance sheet foreign exposure of at least
$10 billion as of December 31, 2013. See 12 CFR 217.100(b)(1); 12 CFR part
225, appendix G, section 1(b). Other BHCs include any BHC that is subject to
12 CFR 225.8 and is not an advanced approaches BHC.
n/a Not applicable.
Projected loan losses, by type of loan, Q4 2013–Q4 2015
Billions of
dollars
Portfolio loss
rates (%)1
Loan losses
First-lien mortgages, domestic
Junior liens and HELOCs, domestic
Commercial and industrial2
Commercial real estate, domestic
Credit cards
Other consumer3
Other loans4
3
4
Average loan balances used to calculate portfolio loss rates exclude loans held
for sale and loans held for investment under the fair-value option, 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.
For each quarter in 2014, risk-weighted assets are calculated using the current
general risk-based capital approach. For each quarter in 2015, risk-weighted
assets are calculated under the Basel III standardized capital risk-based
approach, except for the tier 1 common ratio which uses the general
risk-based capital approach for all quarters.
Projected losses, revenue, and net income before taxes
through Q4 2015
Pre-provision net revenue2
Other revenue3
less
Provisions
Realized losses/gains on securities (AFS/HTM)
Trading and counterparty losses4
Other losses/gains5
equals
Net income before taxes
Memo items
Other comprehensive income6
Other effects on capital
AOCI included in capital (billions of dollars)7
1
2
3
4
2
Basel III
standardized
approach
Risk-weighted assets
(billions of dollars)1
1
1
Current
general
approach
5
6
7
Billions of
dollars
Percent of
average assets1
Q4 2014
Q4 2015
Average assets is the nine-quarter average of total assets.
Pre-provision net revenue includes losses from operational-risk events,
mortgage repurchase expenses, and other real estate owned (OREO) costs.
Other revenue includes one-time income and (expense) items not included in
pre-provision net revenue.
Trading and counterparty losses include mark-to-market and credit valuation
adjustments (CVA) losses and losses arising from the counterparty default
scenario component applied to derivatives, securities lending, and repurchase
agreement activities.
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.
Other comprehensive income is only calculated for advanced approaches
BHCs, as only those BHCs include accumulated other comprehensive income
(AOCI) in calculations of regulatory capital. Other comprehensive income
includes incremental unrealized losses/gains on AFS securities and on any
HTM securities that have experienced other than temporary impairment.
For advanced approaches BHCs, 20 percent of AOCI is included in capital
calculations for 2014 and 40 percent of AOCI is included in capital calculations
for 2015. For the purposes of this stress test cycle, non-advanced approaches
BHCs are assumed to opt-out of including AOCI in their capital calculations.
35
Appendix B: Templates for Comprehensive
Capital Analysis and Review Results 2014
This appendix provides the format that the Federal Reserve will use to disclose the results of the supervisory
stress test under the Comprehensive Capital Analysis and Review.
Tables begin on next page.
36
CCAR 2014 Instructions
Table B.1. All bank holding companies
Projected minimum tier 1 common ratio, Q4 2013 to Q4 2015
Federal Reserve estimates: Severely adverse scenario
Bank holding company
Stressed ratio with original
planned capital actions
Stressed ratio with adjusted
planned capital actions
Ally Financial Inc.
American Express Company
Bank of America Corporation
The Bank of New York Mellon Corporation
BB&T Corporation
BBVA Compass Bancshares, Inc.
BMO Financial Corp.
Capital One Financial Corporation
Citigroup Inc.
Comerica Incorporated
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
Northern Trust Corporation
The PNC Financial Services Group, Inc.
RBS Citizens Financial Group, Inc.
Regions Financial Corporation
Santander Holdings USA, Inc.
State Street Corporation
SunTrust Banks, Inc.
U.S. Bancorp
UnionBanCal Corporation
Wells Fargo & Co.
Zions Bancorporation
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital
ratios. The tables include the minimum ratios assuming the capital actions originally submitted in January 2014 by the bank holding companies (BHCs) in their annual capital
plans and the minimum ratios incorporating any adjustments to capital distributions made by BHCs after reviewing the Federal Reserve’s stress test projections and original
planned capital distributions for those BHCs that did not make adjustments. The minimum capital ratios are for the period Q4 2013 to Q4 2015 and do not necessarily occur in
the same quarter.
Source: Federal Reserve estimates in the severely adverse scenario.
November 1, 2013
Table B.2. All bank holding companies
Projected minimum tier 1 common ratio, Q4 2013 to Q4 2015
Federal Reserve estimates: Adverse scenario
Bank holding company
Stressed ratio with original
planned capital actions
Stressed ratio with adjusted
planned capital actions
Ally Financial Inc.
American Express Company
Bank of America Corporation
The Bank of New York Mellon Corporation
BB&T Corporation
BBVA Compass Bancshares, Inc.
BMO Financial Corp.
Capital One Financial Corporation
Citigroup Inc.
Comerica Incorporated
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
Northern Trust Corporation
The PNC Financial Services Group, Inc.
RBS Citizens Financial Group, Inc.
Regions Financial Corporation
Santander Holdings USA, Inc.
State Street Corporation
SunTrust Banks, Inc.
U.S. Bancorp
UnionBanCal Corporation
Wells Fargo & Co.
Zions Bancorporation
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital
ratios. The tables include the minimum ratios assuming the capital actions originally submitted in January 2014 by the bank holding companies (BHCs) in their annual capital
plans and the minimum ratios incorporating any adjustments to capital distributions made by BHCs after reviewing the Federal Reserve’s stress test projections and original
planned capital distributions for those BHCs that did not make adjustments. The minimum capital ratios are for the period Q4 2013 to Q4 2015 and do not necessarily occur in
the same quarter.
Source: Federal Reserve estimates in the adverse scenario.
37
38
CCAR 2014 Instructions
Table B.3. Advanced Approaches BHC XYZ, Inc.
Projected minimum regulatory capital ratios and tier 1 common ratio,
Q4 2013 to Q4 2015
Federal Reserve estimates: Severely adverse scenario
Projected capital ratios through Q4 2015 under the severely adverse scenario
Actual Q3 2013
Minimum stressed ratios with original planned
capital actions
Q4 2013
Tier 1 common ratio (%)
Common equity tier 1 capital ratio (%)
Tier 1 risk-based capital ratio (%)
Total risk-based capital ratio (%)
Tier 1 leverage ratio (%)
n/a
2014
n/a
2015
Minimum stressed ratios with adjusted planned
capital actions
Q4 2013
2014
2015
n/a
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital
ratios. The tables include the minimum ratios assuming the capital actions originally submitted in January 2014 by the bank holding companies (BHCs) in their annual capital
plans and the minimum ratios incorporating any adjustments to capital distributions made by BHCs after reviewing the Federal Reserve’s stress test projections and original
planned capital distributions for those BHCs that did not make adjustments. The minimum capital ratios are for the period Q4 2013 to Q4 2015 and do not necessarily occur in
the same quarter.
n/a Not applicable.
Required minimum capital ratios for advanced approaches BHCs in CCAR 2014
Regulatory ratio
Tier 1 common ratio1
Common equity tier 1 capital ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
Q4 2013
2014
2015
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
4 percent
5.5 percent
8 percent
4 percent
5 percent
4.5 percent
6 percent
8 percent
4 percent
Note: For purposes of CCAR 2014, an advanced approaches BHC includes any BHC that has consolidated assets greater than or equal to $250 billion or total consolidated
on-balance sheet foreign exposure of at least $10 billion as of December 31, 2013. See 12 CFR 217.100(b)(1); 12 CFR part 225, appendix G, section 1(b). Other BHCs include
any BHC that is subject to 12 CFR 225.8 and is not an advanced approaches BHC.
1
The tier 1 common ratio is to be calculated using the definitions of tier 1 capital and total risk-weighted assets as currently in effect in 2013. All other ratios are calculated in
accordance with the transition arrangements provided in the Board's revised capital framework, issued in July 2013.
n/a Not applicable.
November 1, 2013
39
Table B.4. Advanced Approaches BHC XYZ, Inc.
Projected minimum regulatory capital ratios and tier 1 common ratio,
Q4 2013 to Q4 2015
Federal Reserve estimates: Adverse scenario
Projected capital ratios through Q4 2015 under the adverse scenario
Actual Q3 2013
Minimum stressed ratios with original planned
capital actions
Q4 2013
Tier 1 common ratio (%)
Common equity tier 1 capital ratio (%)
Tier 1 risk-based capital ratio (%)
Total risk-based capital ratio (%)
Tier 1 leverage ratio (%)
n/a
2014
n/a
2015
Minimum stressed ratios with adjusted planned
capital actions
Q4 2013
2014
2015
n/a
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital
ratios. The tables include the minimum ratios assuming the capital actions originally submitted in January 2014 by the bank holding companies (BHCs) in their annual capital
plans and the minimum ratios incorporating any adjustments to capital distributions made by BHCs after reviewing the Federal Reserve’s stress test projections and original
planned capital distributions for those BHCs that did not make adjustments. The minimum capital ratios are for the period Q4 2013 to Q4 2015 and do not necessarily occur in
the same quarter.
n/a Not applicable.
Required minimum capital ratios for advanced approaches BHCs in CCAR 2014
Regulatory ratio
Tier 1 common ratio1
Common equity tier 1 capital ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
Q4 2013
2014
2015
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
4 percent
5.5 percent
8 percent
4 percent
5 percent
4.5 percent
6 percent
8 percent
4 percent
Note: For purposes of CCAR 2014, an advanced approaches BHC includes any BHC that has consolidated assets greater than or equal to $250 billion or total consolidated
on-balance sheet foreign exposure of at least $10 billion as of December 31, 2013. See 12 CFR 217.100(b)(1); 12 CFR part 225, appendix G, section 1(b). Other BHCs include
any BHC that is subject to 12 CFR 225.8 and is not an advanced approaches BHC.
1
The tier 1 common ratio is to be calculated using the definitions of tier 1 capital and total risk-weighted assets as currently in effect in 2013. All other ratios are calculated in
accordance with the transition arrangements provided in the Board's revised capital framework, issued in July 2013.
n/a Not applicable.
40
CCAR 2014 Instructions
Table B.5. Other BHC ABC, Inc.
Projected minimum regulatory capital ratios and tier 1 common ratio,
Q4 2013 to Q4 2015
Federal Reserve estimates: Severely adverse scenario
Projected capital ratios through Q4 2015 under the severely adverse scenario
Actual Q3 2013
Tier 1 common ratio (%)
Common equity tier 1 capital ratio (%)
Tier 1 risk-based capital ratio (%)
Total risk-based capital ratio (%)
Tier 1 leverage ratio (%)
n/a
Minimum stressed ratios with original planned
capital actions
Q4 2013
2014
n/a
n/a
2015
Minimum stressed ratios with adjusted planned
capital actions
Q4 2013
2014
n/a
n/a
2015
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital
ratios. The tables include the minimum ratios assuming the capital actions originally submitted in January 2014 by the bank holding companies (BHCs) in their annual capital
plans and the minimum ratios incorporating any adjustments to capital distributions made by BHCs after reviewing the Federal Reserve’s stress test projections and original
planned capital distributions for those BHCs that did not make adjustments. The minimum capital ratios are for the period Q4 2013 to Q4 2015 and do not necessarily occur in
the same quarter.
n/a Not applicable.
Required minimum capital ratios for other BHCs in CCAR 2014
Regulatory Ratio
Tier 1 common ratio1
Common equity tier 1 capital ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
Q4 2013
2014
2015
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
4.5 percent
6 percent
8 percent
4 percent
Note: For purposes of CCAR 2014, an advanced approaches BHC includes any BHC that has consolidated assets greater than or equal to $250 billion or total consolidated
on-balance sheet foreign exposure of at least $10 billion as of December 31, 2013. See 12 CFR 217.100(b)(1); 12 CFR part 225, appendix G, section 1(b). Other BHCs include
any BHC that is subject to 12 CFR 225.8 and is not an advanced approaches BHC.
1
The tier 1 common ratio is to be calculated using the definitions of tier 1 capital and total risk-weighted assets as currently in effect in 2013. All other ratios are calculated in
accordance with the transition arrangements provided in the Board's revised capital framework, issued in July 2013.
n/a Not applicable.
November 1, 2013
41
Table B.6. Other BHC ABC, Inc.
Projected minimum regulatory capital ratios and tier 1 common ratio,
Q4 2013 to Q4 2015
Federal Reserve estimates: Adverse scenario
Projected capital ratios through Q4 2015 under the adverse scenario
Minimum stressed ratios with original
planned capital actions
Tier 1 common ratio (%)
Common equity tier 1 capital ratio (%)
Tier 1 risk-based capital ratio (%)
Total risk-based capital ratio (%)
Tier 1 leverage ratio (%)
Actual Q3 2013
Q4 2013
2014
n/a
n/a
n/a
2015
Minimum stressed ratios with adjusted planned
capital actions
Q4 2013
2014
n/a
n/a
2015
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of capital
ratios. The tables include the minimum ratios assuming the capital actions originally submitted in January 2014 by the bank holding companies (BHCs) in their annual capital
plans and the minimum ratios incorporating any adjustments to capital distributions made by BHCs after reviewing the Federal Reserve’s stress test projections and original
planned capital distributions for those BHCs that did not make adjustments. The minimum capital ratios are for the period Q4 2013 to Q4 2015 and do not necessarily occur in
the same quarter.
n/a Not applicable.
Required minimum capital ratios for other BHCs in CCAR 2014
Regulatory Ratio
Tier 1 common ratio1
Common equity tier 1 capital ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
Tier 1 leverage ratio
Q4 2013
2014
2015
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
n/a
4 percent
8 percent
3 or 4 percent
5 percent
4.5 percent
6 percent
8 percent
4 percent
Note: For purposes of CCAR 2014, an advanced approaches BHC includes any BHC that has consolidated assets greater than or equal to $250 billion or total consolidated
on-balance sheet foreign exposure of at least $10 billion as of December 31, 2013. See 12 CFR 217.100(b)(1); 12 CFR part 225, appendix G, section 1(b). Other BHCs include
any BHC that is subject to 12 CFR 225.8 and is not an advanced approaches BHC.
1
The tier 1 common ratio is to be calculated using the definitions of tier 1 capital and total risk-weighted assets as currently in effect in 2013. All other ratios are calculated in
accordance with the transition arrangements provided in the Board's revised capital framework, issued in July 2013.
n/a Not applicable.
www.federalreserve.gov
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