View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.


the Fed

& Events


& Regulation




& Communities

Board of Governors of the Federal Reserve System
The Federal Reserve, the central bank of the United States, provides the nation with a
safe, flexible, and stable monetary and financial system.

Home > News & Events > Press Releases

Press Release
March 18, 2011

Federal Reserve completes Comprehensive
Capital Analysis and Review
For release at 11:00 a.m. EDT

The Federal Reserve on Friday announced it has completed the
Comprehensive Capital Analysis and Review (CCAR), its crossinstitution study of the capital plans of the 19 largest U.S. bank holding
As a result of the CCAR, some firms are expected to increase or restart
dividend payments, buy back shares, or repay government capital. The
Federal Reserve on Friday will discuss the reviews and its decisions
with firms that requested a capital action. All 19 firms will receive more
detailed assessments of their capital planning processes next month.
In February 2009, the Federal Reserve advised bank holding companies
that safety and soundness considerations required that dividends be
substantially reduced or eliminated. Since that time, the Federal
Reserve has indicated that increased capital distributions would
generally not be considered prudent in the absence of a well-developed
capital plan and a capital position that would remain strong even under
adverse conditions.
The Federal Reserve's actions on capital distributions come after
significant improvement in both economic conditions and the capital
positions of financial institutions. From the end of 2008 through 2010,
common equity increased by more than $300 billion at the 19 largest
U.S. bank holding companies. Moreover, conclusion of the Basel III

agreement to increase capital requirements and passage of the DoddFrank Wall Street Reform and Consumer Protection Act have
substantially clarified the regulatory environment in which these firms will
be operating. The return of capital to shareholders under appropriate
conditions is a step in the process of improvement in the financial sector
and will help to promote banks' long-term access to capital. Such access
will support lending to consumers and businesses. The capital plan
reviews foster appropriate capital distributions in a measured fashion
while still helping to ensure continued increases in firms' capital bases.
These supervisory reviews by the Federal Reserve come in the context
of a significant change in supervisors' expectations for firms' substantive
capital policies and capital planning processes. Among other things:
Firms are expected to demonstrate their ability to remain viable
financial intermediaries as they make the planned capital
distributions, even under stressed conditions;
Firms are expected to continue to increase their capital base;
In 2011, firms generally are expected to limit dividends to 30
percent or less of anticipated earnings;
Planned share repurchases will be reviewed if there are material
adverse deviations from the revenue and loss assumptions in a
firm's capital plan such that capital is not increasing as
anticipated; and
In the event of a sharp deterioration in economic conditions that
could have negative implications for safety and soundness, the
Federal Reserve may require modification of previously submitted
capital plans.
The CCAR involves a forward-looking, detailed evaluation of capital
planning and stress scenario analysis at the 19 large bank holding
companies. Although it was not standardized to the degree the
Supervisory Capital Assessment Program (SCAP) was in early 2009, it
builds on the experience gained during that exercise. In the CCAR, the
Federal Reserve assessed the firm's ability, after taking into account the
proposed capital actions, to maintain sufficient capital levels to continue
lending in stressed economic environments, including under an adverse
scenario specified by the Federal Reserve. The adverse scenario was
intended to represent developments in a typical recession, with a decline
in economic growth, a rise in unemployment, and a sharp drop in risky
asset prices (for details, please see Comprehensive Capital Analysis
and Review: Objectives and Overview, attached). Federal Reserve
supervisors carefully analyzed and adjusted as appropriate projections
of stressed revenues and losses provided by the firms in the CCAR.
It is important to note that there are a number of reasons why firms
participating in the CCAR may not be making capital distributions this
quarter. For example, a firm may not have requested approval of any
such action, Federal Reserve supervisors may have believed a
requested distribution was too high at this time and could weaken the
firm's ability to weather adverse economic conditions, or supervisors
may not have been comfortable with the capital planning process
underlying the request. Firms may resubmit capital proposals each

quarter, with their prospects for an answer of no objection dependent on
their responses to any concerns raised during the CCAR.
Comprehensive Capital Analysis and Review: Objectives and Overview
(287 KB PDF)

Last Update: March 18, 2011

of the FEDERAL
About the Fed
News & Events
Monetary Policy
Supervision & Regulation
Payment Systems
Economic Research
Consumers & Communities



Freedom of Information (FOIA)
Office of Inspector General
Budget & Performance | Audit
Website Policies | Privacy

20th Street and Constitution Avenue N.W., Washington, DC 20551