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Federal Reserve Issues 2014 CCAR Instructions and Supervisory Scenarios

Today, the Federal Reserve published instructions for the 2014 Comprehensive Capital Analysis and Review (CCAR).  Thirty bank holding companies with $50 billion or more of total consolidated assets will participate in the 2014 CCAR, including 18 bank holding companies that participated in the 2013 CCAR and 12 bank holding companies that will participate in CCAR for the first time.  The 2014 CCAR submissions are due by January 6, 2014.

The Federal Reserve also issued three hypothetical, supervisory scenarios that will be used in the 2014 capital planning and stress testing cycle.  The OCC issued substantively identical scenarios.   The baseline, adverse, and severely adverse scenarios each include 28 variables (16 domestic variables and 12 international variables), including economic activity, unemployment, exchange rates, prices, incomes and interest rates.  The 28 variables include all of the variables provided last year and two new domestic variables—the yield on the 5-year Treasury bond and the prime rate.

As in prior years, six bank holding companies with large trading operations, which represent six of the eight U.S. global systemically important banks (G-SIBs), will be required to factor in a global market shock as part of their stress tests.  The Federal Reserve will publish the components of the global market shock by November 15, 2015.  In addition, for the first time in 2014, eight bank holding companies with substantial trading or custodial operations, which represent all of the U.S. G-SIBs, will be required to incorporate a counterparty default scenario in their stress tests.

For the first time in 2014, the Federal Reserve will publish summary results of its Dodd-Frank and CCAR stress tests conducted under both the supervisory adverse scenario and the supervisory severely adverse scenario.  In prior years, the Federal Reserve only published summary results under its severely adverse scenario.

Materials: 

Federal Reserve, 2014 Supervisory Scenarios for Annual Stress Tests Required under the Dodd-Frank Act Stress Testing Rules and the Capital Plan Rule (Nov. 1, 2013) available here: http://federalreserve.gov/newsevents/press/bcreg/bcreg20131101a1.pdf

Federal Reserve, Comprehensive Capital Analysis and Review 2014: Summary Instructions and Guidance (Nov. 1, 2013) available here: http://federalreserve.gov/newsevents/press/bcreg/bcreg20131101a2.pdf

OCC, Dodd-Frank Stress Testing Scenarios for 2014 (Nov. 1, 2013) available here: http://occ.gov/tools-forms/forms/bank-operations/stress-test-reporting.html

OCC, Final Policy Statement for Developing the Annual Stress Test Scenarios (Nov. 1, 2013) available here: http://www.gpo.gov/fdsys/pkg/FR-2013-10-28/pdf/2013-25421.pdf

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