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Tuesday, December 22, 2015

Fed Issues Guidance on Capital Planning Expectations

The Federal Reserve released guidance that consolidates capital planning expectations – including those defined by the Comprehensive Capital Analysis and Review process — for large financial institutions. It also clarifies differences in those expectations based on firm size and complexity, with the guidance for firms between $50 billion and $250 billion in assets reflecting their lower systemic risk profile and less complex operations.

For example, the guidance notes that senior management of the largest firms should review the capital planning process quarterly, whereas smaller institutions should review it at least semi-annually. In another example, the Fed says it expects larger firms to have a more formal risk identification process and to use “quantitative approaches supported by expert judgment” for risk management. Smaller firms can have a less formal risk identification process and can use either qualitative or quantitative risk measurement approaches.

The guidance also clarifies the expectations for the largest and most complex firms, with total consolidated assets of over $250 billion. The guidance is effective for the 2016 CCAR cycle.

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