Comprehensive Capital Analysis and

Review (CCAR)

CCAR Objectives
Bank Holding Companys (BHC) capital adequacy assessment process,
Qualitativ
e
Assessme
nt

Quantitati
ve
Assessme
nt

including corporate governance and controls and risk measurement and

management practices supporting the process
Assumptions and analyses underlying BHCs capital plan including expected
changes in BHCs risk profile, business strategy or corporate structure
Methodologies surrounding development of BHC internal stress scenarios and
stressnine-quarter,
test
BHCs
post stress capital ratio using Federal Reserves
severely adverse scenario, combined with the path of capital distribution
assumed by the firm
Post-stress capital analysis done by the BHC itself based on supervisory as well as
internal scenarios
Capital distribution includes dividend payments, scheduled payments, common
share repurchases and issuance

Advanced Approaches BHCs

Regulatory
Ratio
CET 1
Tier 1
Total
Tier 1
Leverage

Other BHCs

Q4 2013

2014

2015

NA
4%
8%

4%
5.5%
8%

4.5%
6%
8%

3 or 4%

4%

4%

Regulatory
Ratio
CET 1
Tier 1
Total
Tier 1
Leverage

Q4 2013

2014

2015

NA
4%
8%

NA
4%
8%

4.5%
6%
8%

3 or 4%

3 or 4%

4%

Applicable to BHCs with more than $50 billion in

consolidated assets

CCAR Supervisory
Scenarios
Macroeconomic Variable Categories
1

Economic
Activity

3
Asset Prices

Interest
Rates

International
Measures

Moderate expansion in US economy - GDP growth of 3%, unemployment less than 6%, inflation

Baseline

Adverse

above 2%
Moderate increase in equity and housing prices
Steady rise in both short term and long term rates, BBB corporate spread narrows
Euro - 1.5%, UK - 2%, Japan - 1.25%, Developing Asia - 6.5%

Moderate recession - GDP decline by 1%, unemployment above 9.25%, initial slowing in inflation
Decline in equity and housing prices
Short term rates remain near 0, aversion to long term debt instruments leading to sharp
increase in long term rates
Recession in Euro, UK and Japan, below trend growth in Asia

Severely
Adverse

Severe recession - Unemployment rising to 11%, GDP falling by 4%, inflation down to 1%
Steep decline in housing and equity prices
Short term rates near 0, long term rates decline to 1% ; increase in corporate spreads
Recession in Euro, UK, Japan; Euro GDP contracts 5%, UK contracts 3%

CCAR Components Pre Provision Net

Revenue
Stressed
Scenario

PPNR
Stress
Losses

Capital
Position

Net
Interest
Income

Projection of loan balances, deposit balances by regressing them against economic variable

Non
Interest
Income

Composed of fees and commissions from client activity

Modeling consumer and institutional segments linking them to deposit and loan balance

Non
Interest
Expense

Composed of personnel expense, administrative and other operating expenses

Also includes operational loss expenses (including litigation expenses)
Projection of expense drivers such as headcount, investments, marketing spend and operational

projections
Balances are combined with scenario specific interest rates and foreign exchange rate
projections to calculate NII

projections and macroeconomic variables

losses

CCAR Components Stress Losses

Stressed
Scenario

Provision
for Loan
Losses

PPNR
Stress
Losses

Capital
Position

Expected Loan losses for various segments (asset classes within consumer and commercial
loans) are projected by linking credit performance to macroeconomic variables

Losses on
Securities

Projected losses on AFS and HTM securities due to credit impairment

Modeled using expected relationship with macroeconomic variables considering security

Trading
and
Counterp
arty
Losses

Composed of losses on trading, private equity positions and counterparty exposures from

Other
Losses/Ga
ins

characteristics

derivatives
Application of instantaneous global market shock for re-pricing of positions in the 1 st quarter of
planning horizon
Applicable to 6 BHCs with large trading operations

Losses on loans which are held for sale or under a fair value option stressed using the same
Global Market Shock which is used to calculate trading and counterparty losses

CCAR Components Capital Position

PPNR

Stressed
Scenario

Capital
Position

Stress
Losses

PPNR

Stress
Losses

After-tax
net
income

After-tax
net
income

Capital
Distributio
n

Change in
equity
capital

Capital

RWA
volumes
(projecte
d)

Capital
Adequac
y Ratio