• Bank Capital Plans: Federal Reserve Board Issues Guidance Outlining Supervisory Expectations for Capital Planning at Large Bank Holding Companies
  • September 13, 2013
  • Law Firm: Sullivan Cromwell LLP - New York Office
  • The Federal Reserve recently published a guidance document entitled “Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice” (the “Guidance”). The Guidance sets forth observations regarding the qualitative capital planning processes and related measures at the large bank holding companies (“BHCs”) which participated in the 2013 Comprehensive Capital Analysis and Review (“CCAR”) process. It also outlines the Federal Reserve’s expectations and “best practices” for internal capital planning at BHCs subject to the 2014 CCAR process and the Federal Reserve’s capital plan rule (“Capital Plan Rule”)-generally institutions with more than $50 billion in consolidated assets-going forward. The Guidance is intended to provide “a more comprehensive set of criteria to assist BHC management in assessing their current capital planning processes and in designing and implementing improvements to those processes.” The qualitative planning issues discussed in the Guidance will likely be crucial elements in the Federal Reserve’s evaluation of capital plans and the 2014 CCAR process. This is because the Federal Reserve will thoroughly review the qualitative elements of an institution’s capital plan and may reject capital plans that do not adequately reflect the Federal Reserve’s expectations in this area, notwithstanding that an institution’s capital plan satisfies the Capital Plan Rule’s quantitative minimum stressed capital requirements under the severely adverse scenario. Although the Guidance is directed at institutions subject to the Capital Plan Rule, it may also be of relevance to the capital planning processes of smaller institutions going forward.