Comprehensive Capital Analysis and Review (CCAR) is a United States regulatory framework introduced by the

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

in 2009 to assess, regulate, and supervise large banks and financial institutions – collectively referred to in the framework as

bank holding companies A bank holding company is a company that controls one or more banks, but does not necessarily engage in banking itself. The compound bancorp (''banc''/''bank'' + '' corp ration') is often used to refer to these companies as well. United State ...

(BHCs). It was an extension of the stress tests performed during the

Financial crisis of 2007–2008 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of ...

. The assessment is conducted annually and comprises two related programs: # Comprehensive Capital Analysis and Review # Dodd–Frank Act supervisory

stress testing Stress testing (sometimes called torture testing) is a form of deliberately intense or thorough testing used to determine the stability of a given system, critical infrastructure or entity. It involves testing beyond normal operational capacity, ...

The core part of the program assesses whether: # BHCs possess adequate capital. # The capital structure is stable given various stress-test scenarios. # Planned capital distributions, such as dividends and share repurchases, are viable and acceptable in relation to regulatory minimum capital requirements. The assessment is performed on both qualitative and quantitative bases. The Federal Reserve may order banks to suspend their planned capital distributions to shareholders until the target capital balance is restored.

Dodd–Frank Act supervisory stress testing

Dodd–Frank Act imposes forward-looking stress testing of a bank's capital structure on a quantitative basis. The annual stress-test scenarios are prescribed by the regulatory body, while the mid-cycle testing may be performed under discretionary scenarios. The Federal Reserve publishes three scenarios which each BHC must model: baseline, adverse, and severely adverse. These scenarios contain numeric values of macroeconomic indicators describing potential global economic scenarios three years into the future. According to the Federal Reserve, each scenario represents the following: The BHCs are also asked to design their own scenarios to ensure capital adequacy. The Federal Reserve publishes a summary of each year's results.

References

External links

Information on the FED website

Key Points from the 2015 CCAR

{{DEFAULTSORT:Comprehensive Capital Analysis and Review United States federal banking legislation Stress tests (financial) Consumer Financial Protection Bureau Insurance in the United States 2010 in American law 2010 in economics

Dodd–Frank Act supervisory stress testing

See also

References

External links