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Fitch: Varied U.S. Bank Stress Test Disclosures Create Confusion
March 20, 2013 / 5:38 PM / 5 years ago

Fitch: Varied U.S. Bank Stress Test Disclosures Create Confusion

(The following statement was released by the rating agency) CHICAGO, March 20 (Fitch) Stress test results for the largest U.S. banks, in connection with the Fed's Comprehensive Capital Analysis and Review (CCAR) program, have provided investors some visibility into regulators' views of banks' potential performance under a severely stressed economic scenario. However, Fitch recognizes that the visibility of parallel review processes involving banks that fall outside of CCAR is currently very limited, and this complicates the task of assessing relative performance under stress for those institutions. Consistent and timely analysis of regulator views of banks' capital adequacy, liquidity and regulatory costs has been made more difficult by the confusing array of deadlines, disclosure rules and stress test submission requirements affecting institutions of varying sizes in different ways. The latest example of this is the recently completed Capital Plan Review (CapPR) stress test process of 11 bank holding companies, with assets greater than $50 billion, that were not included in the CCAR process. Under CapPR, the 11 companies were required to submit a capital plan, with internal stress tests and forward-looking capital projections under four scenarios. The Federal Reserve evaluated each bank holding company's (BHC) capital plan submission, focusing on the quality of the capital planning processes; however, these BHCs were not subject to the supervisory stress test cycle, and therefore no supervisory stress test results are currently available. These banks will be subject to the supervisory stress tests until the subsequent stress test cycle commences in the fall of 2013, with public disclosure to follow in March 2014. Of those 11 banks, five have provided public commentary on the outcome of capital plan reviews, with only one BHC, Zions Bancorporation, reporting that the regulators objected to certain proposed capital actions. Comerica Incorporated, Huntington Bancshares, M&T Bank Corp., Northern Trust Corporation and Discover Financial Services all remarked publicly that regulators had raised no objections to their plans. None of the five foreign-owned BHCs provided public commentary The Fed published rules last October outlining procedures for future reviews of capital adequacy for BHCs, state member banks and savings and loan holding companies. The supervisory and company-run stress tests are required under the Dodd-Frank Act and also extend to certain nonbank institutions designated by the Financial Stability Oversight Council (FSOC). The rules call for banks with assets between $10 billion and $50 billion to conduct their first stress tests in the fall of 2013. However, results from those tests will not be made public immediately. Instead, these institutions will not need to disclose stress tests results until 2015 (based on 2014 results). Banks with assets less than $10 billion are not subject to stress testing rules at all, though they are encouraged to have in place the capacity to analyze the potential impact of adverse outcomes on their financial condition. The impact of differing rules on banks of various sizes has become an issue in other areas of bank regulation besides capital adequacy. For example, limitations on debit card interchange fees introduced under the Durbin amendment do not apply to smaller banks (those with less than $10 billion in assets). Contact: Julie Solar Senior Director Financial Institutions +1 312 368-5472 Bill Warlick Senior Director Fitch Wire +1 312 368-3141 Fitch, Inc. 70 W. Madison Chicago, IL 60602 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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