The Federal Reserve today approved the capital plans of 34 large banks participating in the Comprehensive Capital Analysis and Review. The Fed objected to the capital plan of one firm due to qualitative concerns, and issued conditional “non-objections” to three others. The announcement came as the Fed has a proposal pending to tailor the CCAR assessment and simplify the capital supervisory structures CCAR-subject firms face.
The American Bankers Association commented favorably on this proposal and continues to advocate for additional changes to the CCAR process — including improving transparency, further streamlining to avoid CCAR becoming a new de facto capital constraint and revisiting the capital surcharge for global systemically important banks.
“Even with one-time challenges posed by changes to the tax law, the CCAR results demonstrate that the largest banks have strong capital levels, and after making their approved capital distributions, would retain their ability to lend even in a severe recession,” said Vice Chairman for Supervision Randal Quarles. The Fed noted that U.S. firms have substantially increased their capital since the first round of stress tests in 2009. The 35 bank holding companies in this year’s test have increased common equity capital by more than $800 billion since the beginning of 2009. Some banks that were previously included in CCAR were excluded this year following the passage of S.2155, the regulatory reform bill that was signed into law in May.
The Fed’s annual CCAR evaluates the capital planning processes and capital adequacy of the largest banks, including their proposed capital actions such as dividend payments, share buybacks and issuances. The agency can object to a capital plan based on qualitative or quantitative concerns, and it considers factors such as a firm’s projected capital ratios under a hypothetical scenario of severe stress and the strength of the firm’s capital planning processes. For more information, contact ABA’s Hugh Carney.