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Top-Tier US Banks Capital Plans

In the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Reserve has progressively expanded the scope, intensity and transparency of its annual assessment of top-tier US banks' capital plans.

This white paper highlights the key elements of the banks' capital plan submissions which were identified as suffering from critical weaknesses. The thirty top tier US banks now involved in this high stakes annual assessment are painfully aware that even a passing grade is insufficient to meet either the Fed's or the markets' expectations.

When results of the first official, company-wide stress tests performed by top-tier US banking groups were published by the Federal Reserve in May of 2009, markets, banks and regulators all breathed a sigh of relief. Though half of the 19 banks involved demonstrated capital shortfalls, the results allayed the markets' fears about their long-term viability and greatly facilitated the banks' subsequent funding and capital-raising activities. In the five years since this first public exercise, considerable advances have been made in US banks' stress testing practices.