ABA Supports Fed Proposal to Reform CCAR Program

The American Bankers Association today submitted a comment letter supporting the Federal Reserve’s latest — and perhaps most significant to date — proposed reforms to the CCAR stress test program applicable to bank holding companies above $50 billion.

Notably, the reform proposal would replace the current pass-fail approach with one that provides tailored results that translate into ongoing capital buffer levels, the proposed “stress capital buffer.” Overall, ABA said, the proposal makes important progress in the way of simplification of the exceedingly complex capital supervisory structure that large banks face. Moreover, the proposed changes to balance sheet and capital distribution assumptions better reflect actual bank practices in times of stress.

While supportive of the stress capital buffer, ABA urged the Fed to make additional changes to improve the final standard. Specifically, ABA urged the Fed to limit the volatility of stress buffer requirements and increase stress test transparency; to streamline the capital planning process to maximize its usefulness without creating a new de facto capital constraint; and to revisit the capital surcharge for global systemically important banks, which the proposal would add to the stress capital buffer.

ABA also noted that the S. 2155 regulatory reform bill was enacted during the comment period and that the Fed’s final rule should “give effect to the principles underlying that legislation,” including exempting bank holding companies with less than $100 billion in assets from mandatory stress testing and excluding BHCs with $100-250 billion in assets from certain annual stress test requirements. For more information, contact ABA’s Hugh Carney.