FRB – Publication – Helping to Ensure Capital Resiliency Through Effective Capital Planning

December 16, 2020

Upcoming Exams

SR 20-15 published providing examiner guidance to account for pandemic’s impacts. Ensure examiners consider a range of factors when assessing a bank’s capital adequacy. For upcoming exams, exams will evaluate capital levels in relation to a firm’s risk profile. Review if banks measured the effects of COVID-19 to ultimately inform the capital planning process, decision making regarding reserves and capital, and any shifts to risk profile.

Steps For Capital Planning

Engage board to establish risk appetite, tools/processes promoting capital resiliency. Perform a risk assessment to ensure capital levels align with the risk profile, risk appetite. Ensure board sets targeted capital levels supporting risk appetite and strategic plan. Set metrics, triggers to proactively monitor capital adequacy, processes to enact when triggers breached, board’s tools to mitigate risk i.e. capital or line of business actions.

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