Federal Reserve Board Governor Tarullo Describes Potential Changes To Stress Testing And CCAR Programs

In a speech before the Yale University School of Management Leaders Forum, Federal Reserve System Governor ("FRB") Daniel K. Tarullo outlined the results of an "extensive review" of the Dodd-Frank Act Stress Testing ("DFAST") and the Comprehensive Capital Analysis and Review ("CCAR") programs. The review was undertaken by the FRB following the end of the 2015 testing cycle.

Governor Tarullo described a "package of potential changes" that emerged from the FRB review. He noted that such change would not apply to the upcoming 2017 DFAST/CCAR cycle.

He stated that potential changes to the testing programs would include:

• better alignment of the CCAR with new regulatory capital rules to alleviate confusion (for example, the CCAR currently assumes that a firm will continue to make its planned capital distributions during a stress period even though the regulatory capital rules now include a capital conservation buffer to limit such distributions);