Tailoring More Stringent Prudential Standards Under Section 165 of Dodd-Frank: Fed Finalizes Stress Test Relief for Large and Noncomplex Firms

On January 30, 2017, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) adopted a final rule (the “Final CCAR Rule”) that revises the capital plan and stress test rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Final CCAR Rule establishes a new class of bank holding companies (“BHCs”) with at least $50 billion in total consolidated assets—“large” and “noncomplex” firms that are subject to less stringent requirements than other BHCs subject to the annual Comprehensive Capital Analysis and Review (“CCAR”). The Final CCAR Rule also tightens certain requirements for all BHCs subject to CCAR testing. While it remains to be seen whether the new classification will be used to tailor other requirements under Section 165 of the Dodd-Frank Act, the Final CCAR Rule nonetheless represents a significant step towards establishing more tailored regulatory regimes for banking organizations.

The Federal Reserve initially invited for comment on a notice of proposed rulemaking to revise the capital plan and stress test rules for BHCs with at least $50 billion in total consolidated assets and U.S. intermediate holding companies (“IHCs”) of foreign banking organizations in September 2016 (the “CCAR Proposal”). Largely consistent with the CCAR Proposal, the Final CCAR Rule nevertheless responds to some of the concerns raised by the twelve comment letters received by the Federal Reserve on the CCAR Proposal.