Modifications to the Capital Plan Rule and Stress Capital Buffer Requirement

Why it matters

The final rule modifying the Capital Plan Rule and Stress Capital Buffer Requirement reduces volatility in stress capital buffers for large and systemically important financial institutions, which could materially affect regulatory capital planning and supervisory stress testing practices across the banking sector. This regulatory change has broad professional relevance and durability for credit-market participants managing capital and risk under enhanced prudential standards.

Sources

• Federal Register

  Modifications to the Capital Plan Rule and Stress Capital Buffer Requirement

  The Board is adopting a final rule to amend the calculation of the Board's stress capital buffer requirement applicable to certain large bank holding companies, savings and loan holding companies, U.S. intermediate holding companies of foreign banking organizations, and nonbank financial companies supervised by the Board to reduce the volatility of the stress capital buffer requirement. The final rule uses the average of the maximum common equity tier 1 capital ratio declines projected in each of the Board's prior two annual supervisory stress tests to inform a firm's stress capital buffer requirement. The final rule also extends the annual…