Banking Organization Capital Plans and Stress Tests: Federal Reserve Finalizes Elimination of the Qualitative CCAR Assessment for Smaller Firms, Reduction in the De Minimis Exception for Additional Capital Distributions, and Other Notable Revisions to Its Capital Plan and Stress Testing Rules

Sullivan & Cromwell LLP - February 1, 2017

On January 30, 2017, the Federal Reserve published a final rule,  initially proposed on September 26, 2016,  that will modify the CCAR capital plan and stress testing rules applicable to 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 notably, beginning with the 2017 CCAR and DFAST cycle, the final rule will exclude the capital plans of “large and noncomplex” CCAR firms (those that are not global systemically important banks, and that have less than $250 billion of total consolidated assets and less than $75 billion of total nonbank assets) from CCAR’s qualitative review, and the capital plans of large and noncomplex firms will no longer be subject to potential objection on qualitative grounds.  Beginning April 1, 2017, the final rule will also reduce the de minimis exception for capital distributions above the amount reflected in a CCAR firm’s capital plan from 1 percent of Tier 1 capital to 0.25 percent of Tier 1 capital.  Aside from modifying definition of “large and noncomplex,” the Federal Reserve adopted these and other key elements of rules generally as proposed.