Comprehensive Capital Analysis and Review 2018: Assessment Framework and Results

In the supervisory post-stress capital assessment, the Federal Reserve estimates that the aggregate common equity tier 1 ratio for the firms participating in CCAR 2018 would decline in the severely adverse scenario from 12.3 percent in the fourth quarter of 2017 (the starting point for the exercise) to 6.3 percent at its minimum point over the nine-quarter planning horizon. This post-stress common equity tier 1 ratio is 1.1 percentage points higher than the firms’ aggregate common equity tier 1 ratio in the first quarter of 2009.
On balance, most of the 18 firms participating in the CCAR 2018 qualitative assessment have continued to strengthen their capital planning practices since last year, with a majority of those firms being close to meeting or meeting supervisory expectations for capital planning practices. However, certain firms have areas of weakness that fall short of meeting supervisory expectations for capital planning, particularly in the area of internal controls. Specific weaknesses include data and IT infrastructure, internal audit, and model risk management that support the capital planning processes.
No firms were objected to on quantitative grounds in CCAR 2018. The Board of Governors objected to the capital plan of DB USA Corporation on qualitative grounds based on material weaknesses in capital planning. The Board of Governors issued a conditional non-objection to the capital plan of State Street Corporation on quantitative grounds and has required the firm to take certain steps regarding the management and analysis of its counterparty exposures under stress. In addition, the Board of Governors issued conditional non-objections to the capital plans of The Goldman Sachs Group, Inc. (Goldman Sachs) and Morgan Stanley based on quantitative grounds. Each firm has agreed to limit their capital distributions to the levels they paid in recent years.

Board of Governors of the Federal Reserve System

June 2018

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