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Thursday, March 27, 2014

Fed Approves Most Big Banks’ Capital Plans

The Federal Reserve approved the capital plans of 25 of 30 of the nation's largest banks as part of their required stress tests. The Federal Reserve objected to the plans of five participating firms — four based on qualitative concerns and one because it did not meet a minimum post-stress capital requirement. The Fed in its yearly comprehensive capital analysis review — or CCAR — evaluates the capital planning processes and capital adequacy of the largest banks, including their proposed capital actions such as dividend payments, share buybacks and issuances.

U.S. firms have substantially increased their capital since the first set of government stress tests in 2009. The aggregate tier 1 common equity ratio, which compares high-quality capital to risk-weighted assets, of the 30 bank holding companies in the 2014 CCAR has more than doubled from 5.5% in the first quarter of 2009 to 11.6% in the fourth quarter of 2013, reflecting an increase in tier 1 common equity of more than $511 billion to $971 billion during the same period. That trend is expected to continue.

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