FAQ Document (Press Release attachment)

Comprehensive Capital Analysis and Review for 2012
Frequently Asked Questions
November 22, 2011

1. What is the 2012 Comprehensive Capital Analysis and Review (CCAR 2012)?
Capital is central to a bank holding company’s ability to absorb unexpected losses and
continue to lend to creditworthy businesses and consumers. The Federal Reserve expects
large, complex bank holding companies to hold sufficient capital to maintain access to
funding, to continue to serve as credit intermediaries, to meet their obligations to
creditors and counterparties, and to continue operations, even in an adverse environment.
It is with this in mind that the Federal Reserve on Tuesday adopted the capital plans rule
for bank holding companies (BHCs) with assets greater than $50 billion. The capital
plans rule requires these BHCs to develop and submit a capital plan to the Federal
Reserve on an annual basis and to request prior approval from the Federal Reserve under
certain circumstances before making a capital distribution.
CCAR 2012 is the supervisory exercise that is being conducted to facilitate supervisory
assessments of the BHCs’ internal capital planning processes, capital adequacy, and
proposed capital distributions. The CCAR involves forward-looking, simultaneous
analysis of capital planning processes and capital needs at large bank holding companies.
The CCAR represents a substantial strengthening of the Federal Reserve’s approach to
ensuring that large bank holding companies have thorough and robust processes for
managing and allocating their capital resources, and that these are supported by effective
risk-measurement and risk-management practices.
2. Is CCAR 2012 a stress test?
Capital stress tests are only one, albeit an important, part of CCAR 2012. All
participating BHCs will conduct their capital stress tests, under Federal Reserve review,
to assess whether they would have sufficient capital to continue operations and to lend to
households and businesses, even under adverse conditions. These stress test results are
an important tool for a firm’s management and board of directors in their evaluation of
available capital resources. The supervisory assessment of the BHCs’ stress tests will
provide supervisors with insight into the risk-measurement and risk-management
capabilities of these firms.
In addition, for the 19 largest BHCs that participated in CCAR in 2011, the Federal
Reserve will simultaneously conduct a supervisory stress test to help assess the capital
plans and the appropriateness of capital levels for those firms.

In the review of the capital plans and stress test evaluations, the Federal Reserve will
consider the comprehensiveness of the plan, including an assessment of BHCs’ practices
for capturing, measuring, and estimating potential losses under stress from the risks
stemming from all of a BHC’s activities. The Federal Reserve will also assess a BHC’s
capital policies; the reasonableness of a BHC’s assumptions and analysis supporting its
internal capital adequacy assessment; and the BHC’s ability to maintain capital above
each minimum regulatory ratio and above a 5 percent tier 1 common ratio under expected
and stressful conditions, with stress testing carried out both by the firms and the Federal
Reserve.
3. Is the baseline or stress scenario the Federal Reserve’s forecast for the economy?
Neither scenario is the Federal Reserve’s forecast. The Supervisory Baseline broadly
follows the consensus outlook from private forecasters as of mid-November. The
Supervisory Stress scenario is not a forecast for the U.S. or global economy, but a stress
scenario that is useful to gauge the strength and resiliency of the 19 BHCs. The stress
scenario is designed to represent an outcome that, while unlikely, may occur if the U.S
economy were to experience a deep recession while at the same time economic activity in
other major economies were also to contract significantly. In particular, this constitutes a
deep recession by historical standards where the unemployment rate increases by an
amount similar to that experienced, on average, in severe recessions such as those in
1973-1975, 1981-82, and 2007-2009.
4. Will the European situation be taken into account?
The Supervisory Stress scenario provided by the Federal Reserve includes a sizable
shortfall in U.S. economic activity and employment, accompanied by a notable decline in
global economic activity. In addition, a global market shock will be performed that is
based on market price movements seen during the second half of 2008, a time of
significant volatility, with adjustments made to incorporate potential sharp market price
movements in European sovereign and financial sectors.
5. What happens if the Federal Reserve objects to a capital plan?
CCAR 2012 is a broad supervisory exercise that considers a range of factors for the
participating BHCs -- the internal capital planning process, capital distribution policies,
pro forma, post-stress capital ratios, and projected path to compliance with regulatory
capital standards agreed to by the Basel Committee on Banking Supervision as they are
implemented in the United States. Supervisors will evaluate each of these factors and the
supervisory response will correspond to any observed deficiencies. For example, a BHC
with incomplete or insufficient capital planning processes, or with projected capital ratios
that do not appear appropriate given its risk profile and the economic scenarios, may be
required to devote more resources to developing and implementing more appropriate
processes, may be restricted from some or all capital distributions, and may be required to
take actions to improve its capital adequacy.

6. What are you going to disclose to the public?
The Federal Reserve is committed to increasing the transparency of the CCAR process.
This will foster market discipline and ultimately make the largest BHCs more resilient as
better-informed investors encourage banks toward more prudent risk-taking. The Federal
Reserve is releasing the baseline and stress scenarios that will be used to assess the
appropriate levels of BHC capital. Moreover, at the completion of the exercise, the
Federal Reserve will disclose its estimates of revenues and losses, as well as pro forma,
post stress capital ratios for each of the 19 BHCs.
7. How do the capital plans intersect with what is mandated by the Dodd-Frank Act?
The capital plans complement Dodd-Frank in two ways. First, the capital planning
requirements are consistent with the Federal Reserve’s obligations to impose enhanced
capital and risk-management standards on large financial firms under the Dodd-Frank
Act. Second, Dodd-Frank mandates that the Federal Reserve conduct annual stress tests
on all bank holding companies with $50 billion or more in assets to determine whether
they have the capital needed to absorb losses in baseline, adverse, and severely adverse
economic conditions. These tests will be integrated into the ongoing assessments of BHC
capital required by the capital plans rule. As set forth in the law, the Federal Reserve will
be implementing the specific stress testing requirements of Dodd-Frank over the next
year. The Federal Reserve expects that the stress tests required in Dodd-Frank will be an
important component of the annual assessment of BHC capital plans.