Five key points from the Fed’s 2020 CCAR and DFAST results

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On June 25, the Federal Reserve (Fed) released the results of its 2020 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress tests (DFAST). Given the economic turbulence of the last several months, it also conducted additional sensitivity analyses of how banks would fare under three different recession and recovery scenarios from least to most severe: V-shaped, U-shaped, and a W-shaped double-dip. It did not report bank-specific results under the additional scenarios but showed that aggregate loan losses ranged from $560b to $700b and aggregate capital ratios fell from 12% in Q4 2019 to between 9.5% and 7.7%. The Fed also did not issue any qualitative objections this year, fully removing CCAR “passes and failures” from the headlines. However, it did make news this year by suspending share repurchases, limiting dividends, and requiring capital plan resubmissions for all CCAR participants.

Key Takeaways:

  • Balancing confidence and caution.
  • Less payout flexibility than anticipated.
  • Initial SCB disclosures indicate few surprises.
  • Robust and efficient processes are now mandatory.
  • The future of stress testing.

First take

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Julien Courbe

Financial Services Leader, PwC US

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