Bank Capital Requirements, Capital Plans and Stress Tests: Federal Reserve Proposes Substantial Changes to CCAR and Its Capital Rules, Including New Stress Capital Buffer and Stress Leverage Buffer Requirements and the Elimination of the CCAR Quantitative Objection

Sullivan & Cromwell LLP - April 19, 2018

On April 10, 2018, the Federal Reserve issued a proposal designed to create a single, integrated capital requirement by combining the quantitative assessment of CCAR with the buffer requirements of the Federal Reserve’s regulatory capital rules for bank holding companies with $50 billion or more in total consolidated assets and U.S. intermediate holding companies of foreign banking organizations (collectively, “CCAR firms”). Most significantly, for CCAR firms the proposal would create a stress capital buffer requirement and eliminate the quantitative objection provisions of CCAR. The proposal would also create a new stress leverage buffer requirement. The proposal would also modify certain assumptions that the Federal Reserve uses in its supervisory stress tests, and includes a number of other modifications to the capital rules and the capital plan rule, as well as CCAR and DFAST, that reflect and implement the proposed integrated framework.