Federal Reserve Announces 2013 Public Release Dates for Results of the Supervisory Stress Tests Imposed by the Dodd-Frank Act and the Comprehensive Capital Analysis and Review Program
Yesterday, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) issued a press release1 announcing that it will publicly release the results of:
- the supervisory stress tests conducted under Section 165(i)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Supervisory Stress Tests”)2 on Thursday, March 7, 2013; and
- the Comprehensive Capital Analysis and Review (“CCAR”) program3 on Thursday, March 14, 2013,
in each case, at 4:30PM (Eastern Time).
The Supervisory Stress Tests results to be published on March 7 will include the Federal Reserve’s estimates of capital ratios, revenue, and loss estimates under the previously published supervisory severely adverse scenario4 for the subject institutions using a standardized set of capital action/distribution assumptions. These common assumptions across all subject institutions include utilizing for these purposes: actual common dividends paid in the first quarter of the nine-quarter planning horizon; amounts equal to the quarterly average common stock dividends that the institution paid in the first quarter of the planning horizon and the preceding three calendar quarters for the rest of the planning horizon; payments on any other regulatory capital instruments at the stated dividend or interest rate; and no redemption or repurchase of other regulatory capital instruments.
For purposes of the CCAR results disclosure, the Federal Reserve has indicated its March 14 release will include supervisory estimates of subject institutions’ capital ratios under the severely adverse scenario but (as opposed to the Supervisory Stress Test disclosure) reflecting each institution’s own planned capital actions as submitted to the Federal Reserve as part of the annual CCAR capital plan submissions.
Under the Stress Test Rules, subject institutions also have to publish the results of their annual company-run stress tests between March 15 and March 31, 2013.
The text of the Federal Reserve’s release, however, does not address other related and significant timing issues. More specifically:
- the release itself does not address when the Federal Reserve will provide to institutions subject to CCAR the initial results of the supervisory “post stress analysis of capital results” in order for them to use their opportunity to make the one-time downward adjustment to their planned capital distributions from those set forth in the initial capital plan submission as provided for in the CCAR 2013 instructions;5
- because the release does not address when the initial results will be provided, it also does not address how much time a subject institution that intends to make such a downward adjustment will have to make its revised submission to the Federal Reserve prior to the March 14, 2013 release date; and
- the release also does not indicate whether or when the Federal Reserve will provide the Supervisory Stress Test and CCAR results to subject institutions prior to their public release on March 7 and March 14, 2013, respectively.