The US Federal Reserve Board has announced that it intends during 2017 to make more changes in bank capital requirements based on the stress testing process. The Stress Capital Buffer (SCB) will replace the current Capital Conservation Buffer (CCB).
The CCB had been set at 2.5%. The SCB will be set for specific firms based on the outcome of the Comprehensive Capital Analysis and Review (CCAR) stress tests for each but will have a 2.5% floor. It will apply for the 2018 CCAR.
The Comprehensive Liquidity Analysis and Review (CLAR) liquidity stress tests, which test both direct and systemic funding shocks, will also be considered. Research may eventually allow an integrated CCAR and CLAR stress.
The expected effect of this development is that for banks with assets less than USD250 billion, the quantitative portion of the CCAR will cease and their capital requirements will reduce somewhat.
The capital requirements of the eight US G-SIB banks will however increase significantly as the G-SIB Surcharge will remain.