Federal Reserve Launches 2012 U.S. Bank Stress Test
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The Federal Reserve issued a final rule requiring top-tier U.S. bank to submit annual capital plans and launched its new 2012 bank stress test for the top 19 institutions.
The Comprehensive Capital Analysis and Review (CCAR), as it is being called, will carry out a supervisory stress test based on the same stress scenario provided to the firms to support its analysis of the adequacy of the firms' capital.
Institutions will be expected to have credible plans that show they have sufficient capital so that they can continue to lend to households and businesses, even under adverse conditions, and are well prepared to meet regulatory capital standards agreed to by the Basel Committee on Banking Supervision as they are implemented in the United States.
Boards of directors of the institutions will be required each year to review and approve capital plans before submitting them to the Federal Reserve.
The Federal Reserve annually will evaluate institutions' capital adequacy, internal capital adequacy assessment processes, and their plans to make capital distributions, such as dividend payments or stock repurchases. The Federal Reserve will approve dividend increases or other capital distributions only for companies whose capital plans are approved by supervisors and are able to demonstrate sufficient financial strength to operate as successful financial intermediaries under stressed macroeconomic and financial market scenarios, even after making the desired capital distributions.
Institutions will be required to submit their capital plans by January 9, 2012.
Banks that will have to comply with the new rules include: Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS), among others.
The Comprehensive Capital Analysis and Review (CCAR), as it is being called, will carry out a supervisory stress test based on the same stress scenario provided to the firms to support its analysis of the adequacy of the firms' capital.
Institutions will be expected to have credible plans that show they have sufficient capital so that they can continue to lend to households and businesses, even under adverse conditions, and are well prepared to meet regulatory capital standards agreed to by the Basel Committee on Banking Supervision as they are implemented in the United States.
Boards of directors of the institutions will be required each year to review and approve capital plans before submitting them to the Federal Reserve.
The Federal Reserve annually will evaluate institutions' capital adequacy, internal capital adequacy assessment processes, and their plans to make capital distributions, such as dividend payments or stock repurchases. The Federal Reserve will approve dividend increases or other capital distributions only for companies whose capital plans are approved by supervisors and are able to demonstrate sufficient financial strength to operate as successful financial intermediaries under stressed macroeconomic and financial market scenarios, even after making the desired capital distributions.
Institutions will be required to submit their capital plans by January 9, 2012.
Banks that will have to comply with the new rules include: Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS), among others.
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