Insights from 2017 DFAST results

The Federal Reserve (FRB) conducted supervisory stress tests of 34 BHCs under the Supervisory Severely Adverse (SSA) and Supervisory Adverse (SA) scenarios using a standardized set of capital actions. The FRB calculates its projections of a BHC’s balance sheet, risk-weighted assets, net income, and resulting regulatory capital ratios under SA and SSA scenarios using data provided by the BHCs and a set of models developed or selected by the FRB. Key methodology changes for 2017 include:

• SLR ratio was introduced for advanced banks
• CRE loan loss models
• Operational risk

Despite a slightly severe downturn in the 2017 SSA scenario, banks exhibited better stress test performance. Regulatory capital ratios for all 34 banks remain above the required minimum. And only 7 of 33 comparable banks reported a lower minimum Common Equity Tier 1 (“CET1”) ratio compared to 2016.