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Tuesday, December 17, 2013

Federal Reserve Reports BHC Stress Testing Changes

The Federal Reserve, in a letter to banks, noted it will use its own projections of bank assets and liabilities to analyze capital plans under the 2014 stress tests.

In past reviews, the Federal Reserve used the projections of asset and liability balances and risk-weighted assets provided by each bank holding company (BHC). However, in the instructions for the Comprehensive Capital Analysis and Review (CCAR) for 2014, the Federal Reserve noted that it will independently project BHC balance sheets and risk-weighted assets under the supervisory scenarios. The Federal Reserve will use these projections to produce its projections of pre-provision net revenue, loan losses, risk-weighted assets and other relevant items. These projections will be used to compute pro forma regulatory capital ratios under the supervisory baseline, supervisory adverse and supervisory severely adverse scenarios.

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