Fed Paper on Internal Capital Planning Procedures at Large Bank Holding Companies

Date Published 8/20/2013
Author Marja Hoek-Smit
Theme Housing Finance Policy

Fed Paper on Internal Capital Planning Procedures at Large Bank holding companies

August 19, 2013

Many large Bank Holding Companies (BCHs) subject to the Capital Plan Rule have made substantial improvements incapital planning over the last few years. There is, however, considerable room for advancement according to this paper issued by the Federal Reserve on Monday August 19.

In this paper, the Federal Reserve discusses in detail it’s expectations for internal capital planning at the large, complex BHCs subject to the Capital Plan Rule in light of the seven principles of the Capital Adequacy Process. The discussion is based on the range of practices it has observed at these companies during the last three annual Comprehensive Capital Analysis and Review exercises. The Federal Reserve found that firms needed to improve a number of aspects of their capital planning processes, including their accounting for risks most relevant to the specific business activities, their methods of projecting the effect of certain stresses on their capital needs, and their governance of the capital planning processes.

The purpose of this publication is two-fold. First, it is intended to assist BHC management in assessing their current capital planning processes and in designing and implementing improvements to those processes. Second, it is intended to assist a broader audience in understanding the key aspects of capital planning practices at large, complex U.S. BHCs and the importance the Federal Reserve puts on ensuring that these firms have robust capital resource.

The Federal Reserve will start the 2014 CCAR process in the fall.  In addition to the 18 firms that participated in 2013, 12 firms with more than $50 billion in total assets that have not previously been part of the CCAR are expected to participate.

Link: Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice

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