First take: CCAR stress testing

March 2014

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The stress test results published yesterday (March 26th) as part of the Federal Reserve's third annual CCAR follow last week's release of Dodd-Frank Act Stress Test (DFAST) results. The major difference between DFAST and CCAR is that CCAR incorporates BHCs' proposed capital outflows and assesses capital planning processes. Four BHCs' capital plans were rejected yesterday due to qualitative process issues around capital planning and risk management, as we had anticipated last week in our Stress test first take: Ten key points from the Federal Reserve's 2014 DFAST.

  1. Fed raises the bar for the largest BHCs.
  2. Quality of process trumps quantity of capital.
  3. Half of foreign-owned BHC capital plans were rejected.
  4. Half of the big six banks were unable to distribute desired capital, despite analysts' optimism.
  5. Fed asset growth projections drove Tier 1 Common ratios downward.
  6. Overall capital payouts only moderately increased from last year.
  7. Capital planning enhancements pay off.
  8. More capital constraints are on the way.
  9. Janet Yellen is taking charge.
  10. The Fed is effectively centrally planning capital.

This First take elaborates on these key points.

"We think two to four [banks] won't be able to satisfy the Federal Reserve next week."

- Dan Ryan, PwC Financial Services Advisory Leader, Reuters (March 20, 2014)

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Dan Ryan
Banking and Capital Markets Leader
Tel: +1 (646) 471 8488

Alison Gilmore
Asset and Wealth Management Marketing Leader
Tel: +1 (646) 471 0588

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