The FRB released the results of its annual large bank holding company capital assessment exercise known as the Comprehensive Capital Analysis and Review (“CCAR”). The FRB evaluated the capital adequacy and planning processes of the 30 largest bank holding companies, each of which has $50 billion or more of total consolidated assets. These 30 institutions have a combined $13.5 trillion in assets and hold roughly 80% of all U.S. bank holding company assets. The two primary gauges of the FRB’s stress test were the Tier 1 common ratio and the leverage ratio.
In its review, the FRB approved the individual capital plans of 25 large bank holdings companies, but rejected the capital plans of five major firms: Citigroup, HSBC North America Holdings, Inc., RBS Citizens Financial Group Inc., Santander Holdings USA Inc. and Zions Bancorporation. The FRB stated that the first four were rejected for qualitative reasons, but Zions was rejected on the ground that it did not meet the minimum, post-stress Tier 1 common ratio of 5%.
The FRB stated that its objections to the capital plans of Citigroup, HSBC, RBS Citizens and Santander were chiefly based upon the FRB’s determination that these plans were deficient with respect to their ability to project revenue and losses under stress scenarios. Citigroup, which failed the same test in 2012, was cited by the FRB for, among other things, failure to correct certain previously identified issues in its capital planning processes.
As a result of the FRB’s determinations, each of these five institutions is required to resubmit its capital plan to the FRB following substantial remediation of the identified issues.