The US central banking system released a report tilted ‘Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice’, which aims to promote better capital planning at BHCs.
The paper outlined that large bank holding companies have considerably improved their capital planning processes in recent years, although they require improving their practices for assessing the capital for stressful economic and financial conditions.
The capital assessment was observed by the Federal Reserve during the past three Comprehensive Capital Analysis and Review (CCAR) tests, which is carried out every year.
While considering their capital requirements, the bank holding companies should especially concentrate on the specific risks they could face under potentially stressful conditions, the paper said.
Additionally, BHCs should strengthen their capital planning processes, such as accounting for risks most relevant to the specific business activities, methods of projecting the effect of certain stresses on their capital needs, and the capital planning processes governance.
