First take: DFAST stress testing

March 2015

Start adding items to your reading lists:
Save this item to:
This item has been saved to your reading list.


For the first time all banks passed DFAST this year, but this unfortunately tells us nothing about their chances of passing next week's CCAR qualitative assessment

The DFAST results published yesterday are the Federal Reserve's (Fed) first stress test results released in 2015. On March 11th, the Fed will release the more important Comprehensive Capital Analysis and Review (CCAR) results which will tell us whether the banks passed the Fed's qualitative and quantitative assessments in order to return more capital to shareholders.

  1. All banks pass DFAST's classroom test; next week is CCAR's road test.

  2. More post-stress capital exists today than did pre-stress capital during the financial crisis.

  3. Industry capital ratios improve faster overall than at the largest banks.

  4. Leverage ratio appears binding for many large banks.

  5. High analyst capital payout expectations have likely caused a few banks to overshoot in their proposed capital actions.

  6. Fed models seem to be maturing and becoming more predictable.

  7. Loan loss rates improve due to fewer legacy problem portfolios and improved underwriting standards.

  8. Banks overall are positioned well under the adverse scenario's rising interest rate environment.

  9. Minimum capital ratios look worse than reality.

  10. DFAST (and CCAR) will likely be tougher in the future.

This First take elaborates on these key points.

Contact us

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

Follow us