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The Board of Governors of the Federal Reserve System ("FRB") requested comments on a proposal to revise the capital plan and stress test rules for bank holding companies with total consolidated assets of between $50 billion and $250 billion, on-balance sheet foreign exposure of less than $10 billion, and nonbank assets of less than $75 billion. For a bank holding company meeting the asset description (a "large and noncomplex firm"), the proposal would remove the qualitative assessment aspect of the Comprehensive Capital Analysis and Review ("CCAR") test.
Under current CCAR requirements, the FRB may object to a capital plan on either quantitative or qualitative grounds. A qualitative objection amounts to a determination that under a proposed capital plan, the firm would not be able to maintain appropriate capital ratios. A qualitative objection is a finding that the firm's capital planning is not sufficiently reliable, and it warrants a more nuanced assessment by the FRB of the firm's capital plan. Under this proposal, the FRB would not make a qualitative assessment in the CCAR review but instead assess the capital plans of "large and noncomplex firms" outside of the CCAR through the normal supervisory process.
The proposal reflects the FRB's "less stringent expectations for these less systemic firms, which are generally engaged in traditional banking activities."
Among other provisions, the proposal specifically would:
- modify reporting requirements for large and noncomplex firms to reduce burdens by: (i) raising materiality thresholds; (ii) reducing the scope of the data collection on these firms' stress test results; and (iii) reducing supporting documentation requirements; and
- for all bank holding companies subject to the capital plan rule: (i) simplify the initial applicability provisions for the capital plan and stress test rules; (ii) reduce the amount of additional capital distributions that a bank holding company may make during a capital plan cycle without seeking the Board's prior approval; and (iii) extend the range of potential "as of" dates for the trading and counterparty scenario component used in the stress test rules.
Comments on the proposal must be submitted by November 25, 2016.
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