The Clearing House Association (TCH) comment letter to the U.S. Banking Agencies expresses general support for the agencies’ proposed rules regarding amendments to the capital plan and stress test rules, with several recommended enhancements. Most notably, TCH commends the proposed rules’ three-month shift forward in the start date of the annual capital plan and supervisory and company-run stress test cycles. The proposed rules would prevent a BHC from making capital distributions in a given quarter to the extent that it does not execute capital issuances for that same quarter reflected in its capital plan. TCH urges the Federal Reserve to abandon this proposed mechanical approach altogether or, at most, adopt an alternative requirement that would allow a BHC to make planned distributions in a given quarter so long as it has completed capital issuances totaling at least the amount necessary to maintain (i) the required Tier 1 Common 5% ratio and (ii) remain above the applicable minimum regulatory capital ratios under CCAR’s severely adverse scenario, taking into account the planned distribution on a pro forma basis. Further, TCH does not believe that the NPR commentary’s expectation that the bank-designed stress scenario result in an impact on projected pre-tax net income that is “at least as severe as” the results of the company-run stress test under the Federal Reserve’s severely adverse scenario contributes to robust stress scenario development, and should therefore be eliminated from the commentary to the final rules.
You Might Also Be Interested In...
Regulatory Reporting and Accounting BPI and IIB Comment on Federal Reserve Proposal to Revise FR Y-7Q Capital and Asset Report for Foreign Bank Organizations
Bank Capital and Stress Testing DFAST 2022: Volatility, Capital Increases, and the Implications for the U.S Economy
Bank Capital and Stress Testing BPI Statement on the Federal Reserve’s Release of the 2022 Stress Test Results
Bank Capital and Stress Testing Potential Costs Of Banning Capital Distributions By Banks In Bad Times
Bank Capital and Stress Testing A Modification to the Basel Committee’s Standardized Approach to Operational Risk
Regulatory Reporting and Accounting BPI Comments on Federal Reserve Implementation of Capital Assessments and Stress Testing Reports
More Posts by This Author
Digital Assets BPI Comments on Treasury Department Review of Digital Assets in Response to Executive Order
Community Reinvestment Act BPI Comments on Federal Banking Agencies’ Community Reinvestment Act Proposal
Bank Liquidity The Bank of England Just Released Its Plan for Getting Smaller. The Fed Could Learn from it.