CCAR - Methodology and Result

7/30/2019 CCAR - Methodology and Result

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Com prehensive Cap it al An alysisand Review 2012:M eth od ology and Resul t s

for Stress Scenario Projections

M arch 13, 2012

B O A R D O F G O V E R N O R S O F T H E F E D E R A L R E S E R V E S Y S T E M



Note: The Federa l Reserve rev ised th is paper on M arch 16, 2012, to correct comput at iona l errors f or

some loss rat es and levels. The correction s do not impa ct ot her f igur es, including capita l rat ios.

More in fo rmat ion : http : / /www.federa lreserve.gov/newsevents /press/bcreg/bcreg20120316a1.pdf



Com prehensive Cap it al An alysisand Review 2012:M eth od ology and Resul t s

for Stress Scenario Projections

M arch 13, 2012

B O A R D O F G O V E R N O R S O F T H E F E D E R A L R E S E R V E S Y S T E M



I . In t rod uc t ion and Execut ive Sum m ary

The Federal Reserve expects large, complex bank holding companies to hold suff ic ient capi ta l in

order to m ain ta in access to fund ing , to cont inue t o serve as c red i t in te rm ediar ies, to m eet th e i r

ob l iga t ions to c red i t o rs and count erpar t ies , and to cont inue opera t ions , even under adverse econom ic

condi t ions. The Com pre hen sive Capita l Analys is and Review (CCAR) is a super v isory assessmen t by the

Federal Reserve of the capi ta l p lanning processes and capi ta l adequacy of these large, complex bank

hold ing com panies (BHCs). The CCAR is th e Federal Reserve's central m echanism fo r d evelopin g

superv isory assessments of capi ta l adequacy at these f i rms.

Ninet een BHCs w ere requ ired t o par t ic ipate in th is year 's CCAR (CCAR 2012).

[Footnote] 1

T h e BHCs t h a t p a r t i c i p a t e d i n CCAR 2 0 1 2 a r e A l l y Fi n a n c ia l I n c. , Am e r i ca n Exp r e ss Co m p a n y , Ba n k o f Am e r i ca

Co r p o r a t i o n , Th e Ba n k o f Ne w Yo r k M e l l o n Co r p o r a t i o n , BB& T Co r p o r a t i o n , Ca p i t a l On e Fin a n c ia l Co r p o r a t i o n ,

Ci t ig ro up Inc . , Fi f th Th i r d Banco rp , The Go l dm an Sachs Gro up , Inc ., JPM or gan Chase & Co. , Keycorp , M etL i fe , Inc . ,

M o r g a n S t a n le y , Th e PNC Fin a n c ia l Se r v i ce s G r o u p , I n c ., Re gio n s F i n a n c ial Co r p o r a t i o n , St a t e St r e e t Co r p o r a t i o n ,

SunTrus t Banks, Inc . , U.S. Bancorp , and Wel ls Fargo & Company.[endo f f o o t n o t e1. ]

In early January,

these BHCs submitted comprehensive capi ta l p lans to the Federal Reserve, descr ib ing their s trategies for

m anaging the i r cap i ta l over a n ine-quar ter p lann ing hor izon. The purp ose o f requ i r ing BHCs to deve lop

and m ain ta in these cap i ta l p lans is to ensure tha t t he ins t i tu t ions have robust , fo rw ard- look ing cap i ta lp lann ing pro cesses tha t account fo r t he i r u n ique r isks and tha t th e ins t i tu t ions have su f f ic ien t cap i ta l to

cont inu e opera t ion s th rougho ut t im es o f econom ic and f inanc ia l market s t ress. As par t o f i ts

assessmen t of th e plans, t he Federal Reserve p rojecte d losses, revenu es, expenses, and capi t a l rat io s for

each of the 19 BHCs under a severely adver se macro econo m ic scenar io speci f ied by the Federal Reserve.

Th is paper descr ibes th is scenar io , p rov ides an overv iew o f the ana ly t ica l f ramew ork and em pi r ical

methods used by the Federal Reserve to generate these stress scenar io project ions, and presents the

resul ts .

The pro ject ions p rov ide a un ique p erspec t ive on the robu stness o f th e cap ita l po si t ions o f th ese

f i rm s because th ey incorpora t e de t a i led in f o rm at ion about t he r isk charac ter ist ics and bus iness act iv i t ies

of each BHC and because they are est im ated us ing a consisten t appro ach across al l of t he BHCs. The

Federal Reserve is d isc los ing the stress scenar io project ions to enhance transparency about the capi ta l

of th e 19 BHCs part ic ipat in g in th e CCAR exerc ise. The Federal Reserve also b el ieves th at pro v id ing

in form at ion abou t bo th the resu l ts o f th e st ress scenar io p ro jec t ions and th e m etho do logy w i l l p rov ide

usefu l cont ex t fo r m arket par t icipants , ana lysts , academ ics, and o t hers to in te rpre t th e resu l ts.

The stress scenar io pro ject ion s wer e calculat ed by Federal Reserve analysts using input data

pro v ided b y t he 19 BHCs and a set of mo dels developed or selected by th e Federal Reserve. The



pro jec t ion s a re based on a hypo the t ical , severe ly adverse m acroeconom ic and f inanc ial m arke t scenar io

developed by the Federa l Reserve, featur ing a deep recession in the Uni ted States, s ign i f icant decl ines in

asset pr ices and increases in r isk premia, and a slowdown in g lobal economic act iv i ty ( the "Supervisory

Str ess Scenario" ). Six BHCs w i th large tr ad ing, pr ivate equi t y, and derivat iv es act iv i t ies are a lso subject

to a globa l f inanc ial m arke t shock on th ose p os it ions.

[ foo tnote ] 2 These BHCs are Bank o f Am er i ca Cor po ra t ion , Ci t ig r ou p Inc . , The Go ld m an Sachs Group , Inc. , JPM or gan Chase

Co . , M o r g a n St a n le y , a n d W e l l s Fa r g o & Co m p a n y .[endo f f o o t n o t e2. ]

The Federa l Reserve 's pro ject ions for the 19 BHCs under the Supervisory Stress Scenario should

no t be in te rp re t ed as expected o r l i ke ly ou tcom es fo r th ese f i rm s, bu t ra the r as poss ib le resu l ts under

hypo t he t ica l , h igh ly adverse cond i t io ns. The p ro jec t ions inco rpora t e a num ber o f conserva t ive m ode l ing

assumpt ions. The p ro jec t ions emb ed the cap i ta l ac t ions - i ssuance o f cap i ta l inst ru m ents , d iv idend

payments, and share repurchases - that each BHC included in i ts capi ta l p lan under a basel ine scenario

re f lec t ing expected econom ic cond i t ions. Tha t i s, BHCs a re assumed to m ake th e i r p lanned d iv idends

and o t he r cap i ta l d is t r ibu t ions even und er the adverse cond i t ions o f the Superv iso ry St ress Scenar io .

Th is conserva t ive appr oach asks i f a BHC w ou ld be ab le to m ee t superv iso ry expecta t ions fo r cap ita l

ra t ios shou ld adverse econom ic cond i t ion s emerge and the BHC m a in ta ined i ts p lanned b ase l ine

distr ibut ions. To i l lustra te the impact o f the stress scenario a lone, the Federa l Reserve a lso ca lcu lated

stressed regulatory capi ta l ra t ios exclud ing p lanned capi ta l act ions af ter Q1 2012.

[ foo tnote ] 3 T h e r a t i o s a ssu m e p l a n n e d ca p i t a l a c t i o n s t h r o u g h Q1 2 0 1 2 , b u t n o m a t e r i a l ca p i t a l i ssu a n ce s f r o m M a r ch 1 6

t h r o u g h M a r c h 3 1 , 2 0 1 2 .[endo f f o o t n o t e3. ]

Finally, i t is

impor tan t to no te tha t the s t ress scenar io p ro jec t ions es t ima te the impact o f adverse economic and

f inanc ia l marke t cond i t ion s on each ins t i tu t ion 's cap i ta l resources. The st ress scenar io p ro jec t ions do

no t m ake exp li c i t behav io ra l assum pt ions abou t t he p ossib le act ions o f a BHCs' c red i to rs and

coun t e rpar t ies in the scenar io , excep t t h ro ugh t he Superv iso ry St r ess Scenar io 's characte r iza t ions o f

f inancia l asset pr ices and economic act iv i ty.

The resul ts o f the stress scenario pro ject ions suggest that the 19 BHCs as a group would

exper ience sign i f icant losses und er th e assum pt ion s of th e Super visory Str ess Scenario . Losses at t he 19

BHCs are pro jected to to ta l $534 b i l l ion over the n ine quarters of the scenario , includ ing losses across

th e loan por t f o l ios, t rad ing and coun te r par ty c red i t losses f ro m t he g loba l f inanc ial m arke t shock, and

losses on securi t ies he ld in th e BHCs' investm ent por t f o l ios. Losses re la ted to op erat ion al r isk event s

such as f raud , com put e r system s fa i lu re , and emp loyee law su i ts , and losses re lated to m or t gage

repur chases, w h ich a re inc luded in p re -p r ov is ion ne t revenue (PPNR), add ano t her $115 b i l li on to t h is

to ta l . Pro jected PPNR at t he 19 BHCs is $294 b i l l ion over the n ine quart ers of t he scenario . Togeth er,



th e h igh p ro jec ted losses and low p ro jec ted PPNR resu l t in p ro jec ted ne t incom e be fo r e taxes o f -$222

bi l l ion for the 19 BHCs. This is an extremely low level o f net income re la t ive to h istor ica l experience in

the U.S. banking industry, even in periods of considerable economic and f inancia l market stress.

These ne t income p ro jec t ions resu l t in substan t ia l p r o jec ted dec l ines in regu lato r y cap i ta l ra t ios

for nearly a l l the BHCs under the assumptions of the Supervisory Stress Scenario and the Federa l

Reserve 's conservat ive po l icy assum pt ions. As i l lustra t ed in Figure 1, t he aggregate po st-stress t ier 1

com m on ra t io inc lud ing p lanned cap i ta l ac t ions fo r the 19 BHCs fa l l s f ro m 10 .1 pe rcen t in Q3 2011 to 6 .3

percent in Q4 2013. This post-stress leve l exceeds the aggregate t ier 1 common rat io for these BHCs at

the start o f the 2009 Supervisory Capi ta l Assessment Program (SCAP), re f lect ing the more than $300

b i l l ion increase in t ie r 1 com m on eq u i ty a t these BHCs since tha t t im e .

Desp i te the som et im es sign i f i can t p ro jec ted d ecreases fo r m any o f the f i rm s, most o f the BHCs

mainta in stressed regulatory capi ta l ra t ios includ ing a l l p lanned capi ta l act ions above regulatorym in im um levels over th e course of the stress scenario hor izon. Overa l l , 4 o f the 19 BHCs have one or

more p ro jec ted regu la to ry cap i ta l ra t ios tha t fa l l be low regu la to ry m in imum leve ls a t some po in t ove r

th e s t ress scenar io ho r izon , inc lud ing 3 BHCs w i th a s t ressed ra t io o f t ie r 1 comm on equ i ty to r i sk-

w e igh ted asse ts (the t ie r 1 com m on ra t io ) tha t fa l ls be low th e 5 pe rcen t benchm ark . In in te rp re t ing

these resul ts, i t is important to recal l that the Federa l Reserve 's stress scenario pro ject ions are

de l ibe ra te ly s t r ingen t and conserva t ive under hypo t he t ica l , adverse econom ic cond i t ions and th e resu l ts

a re no t fo r ecasts o r th e m ost l i ke ly ou t com es fo r these BHCs.



Figure 1: Initial and Str essed Tier 1 Com m on Capit al Ratios

[For the accessible version of this figure, please see the accompanying HTML.]

I I. Com preh ensive Cap i t a l Ana lys is and Review

The CCAR is th e cen t ra l e lem ent o f the Federa l Reserve 's appr oach to ensur ing th a t l a rge BHCs

have tho rough and robust p rocesses fo r manag ing the i r cap i ta l resources, suppor ted by e f fec t i ve r i skm easurem ent and r i sk man agem ent p ract i ces. In th e f i r s t CCAR, cond ucte d i n ea r l y 2011 , 19 l arge ,

comp lex BHCs submi t ted comprehens ive cap i ta l p lans to the Federa l Reserve , descr ib ing the i r s t ra teg ies

fo r manag ing the i r cap i ta l ove r a n ine -quar te r p lann ing ho r i zon , and the Federa l Reserve eva lua ted

these submiss ions.

[ fo tno te ] 4 See Board o f Gover nor s o f th e Federa l Reserve Sys tem , "Com pre hen s ive Cap i t a l Ana lys is and Rev iew: Ob jec t iv

and Overv i ew " (M arch 18 , 2011) fo r a fu l l descr ip t ion o f th e 2011 CCAR. Th is paper is ava i lab le a t

h t t p : / / w w w . f e d e r a l r e s e r v e . g o v / n e w s e v e n t s / p r e s s / b c r e g / b c r e g 2 0 1 1 0 3 1 8 a 1 . p d f .[endo f fo o tn o te4. ]

These 19 BHCs a re the same ins t i tu t i ons tha t pa r t i c i pa ted i n the 2009 Superv i so ry

Capi ta l Assessment Program (SCAP).

[ foo tno te ] 5 See h t t p : / / w w w . f e d e r a l r e s e r v e . g o v / b a n k i n f o r e g / s c a p . h t m fo r a d e scr ip t i o n o f t h e Su p e rv i so ry Ca p i ta l

Assessment Program (SCAP).[endo f fo o tn o te5. ]

I n Novem ber 2011 , the Federa l Reserve i ssued a f i na l ru le requ i r i ng a l l U .S. -dom ic i l ed , to p - t i e r

BHCs w i th co nso l i da ted asse ts o f $50 b i l l i on o r m ore to deve lo p and subm i t cap i ta l p lans to t he Federa l



Reserve on an an nual basis ( the capi ta l p lans ru le).

[ foo tnote ] 6 76 Fed. Reg. 74631 (Dec. 1 , 2011) , to be cod i f ied a t 12 CFR 225.8 ; see

h t t p : / / w w w . f e d e r a l r e s e r v e . g o v / n e w s e v e n t s / p r e s s / b c r e g / 2 0 1 1 1 1 2 2 a . h t m f o r a d e sc r i p t i o n o f t h e ca p i t a l p l a n sr u l e . Un t i l Ju l y 2 1 , 2 0 1 5 , t h e ca p i t a l p l a n s r u l e w i l l n o t a p p l y t o a n y BHC su b s id i a r y o f a f o r e i g n b a n k in g

o r g a n i za t i o n t h a t i s cu r r e n t l y r e l y i n g o n Su p e r v i s i o n a n d Re g u la t i o n L et t e r SR 0 1 - 0 1 i s su e d b y t h e Bo a r d ( a s i n

e f f e c t o n M a y 1 9 , 2 0 1 0 ) .[endo f f o o t n o t e6. ]

This rule applies curr ent ly t o 30 BHCs. CCAR 2012

focused o n eva lua t ion and assessm ent o f the cap i ta l p lans subm i t t ed by th e 19 BHCs th a t pa r t i c ipa ted in

the 2011 CCAR, whi le the capi ta l p lans of the addi t ional 11 BHCs subject to the capi ta l p lans ru le were

evaluat ed in a separate p rocess (see t he b ox on page 7).

Consistent wi th the capi ta l p lans ru le , the Federa l Reserve 's analysis o f these p lans focused on

four key a reas:

• th e com prehen s iveness o f th e cap i ta l p lan , inc lud ing th e ex ten t to wh ich th e ana lysis under ly ing

th e p lan cap tu red and appro pr ia te ly addressed po t en t ia l r i sks s temm ing f rom a ll act i v i t ies

across the BHC under basel ine and stressed economic condi t ions;

• th e reasonab leness o f th e BHC's assump t ion s and ana lysis under ly ing the cap i ta l p lan and the

robustness of i ts capi ta l p lanning process;

• th e BHC's cap ita l po l icy govern ing d ist r ibu t ions and o the r cap i ta l ac t ions; and• th e BHC's ab i l it y to ma in t a in cap i ta l above speci f ied m in im um regu la to ry cap i ta l ra t ios and

above a ra t io o f t ie r 1 com m on cap i ta l to r i sk-w e igh ted asse ts o f 5 pe rcen t

[ foo tnote ] 7 T h e 5 p e r ce n t m in im u m f o r t h e t i e r 1 co m m o n r a t i o i s a su p e r v i so r y a sse ssm e n t ( d e r i ve d f r o m a n a n a l ys i s o f

h i s t o r i ca l d a t a f o r l a r g e U . S . BHCs ) o f h o w m u ch co m m o n e q u i t y t h e se BHCs n e e d t o p r o v i d e a h i g h d e g r e e o f

c o n f i d e n c e t h a t t h e y c o u l d w i t h s t a n d u n e x p e c t e d f u t u r e l o s se s.[endo f f o o t n o t e7. ]

u n d e r b o th

expected cond i t ions and s t ress fu l cond i t ions th roughou t the p lann ing hor izon .

This last assessmen t w as based on pro ject ion s of each BHC's losses, revenue, exp enses, and

capi ta l ra t ios made by th e BHCs and, separate ly, by the Federa l Reserve. Each BHC m ade four sets of

pro ject ions under one basel ine and one stress scenario developed by each f i rm ("BHC scenarios") and

one basel ine and one stress scenario developed by the Federa l Reserve ("supervisory scenarios").

[ foo tnote ] 8 So m e BHCs o p t e d t o u se t h e Su p e r v i so r y Ba se l i n e Sce n a r i o a s t h e i r o w n b a se l i n e sce n a r i o , a n d t h u s m a d e o n l y

t h r e e se t s o f p r o j e c t i o n s .[endof f o o t n o t e8 .]

As part o f i ts review of the capi ta l p lans, the Federa l Reserve generated i ts own pro ject ions of

the BHCs' losses, revenues, expenses, and capi ta l ra t ios under severe ly adverse economic and f inancia l

m arket con di t ions. These stress scenario p ro ject io ns are based on data prov ided by t he BHCs in

regulatory reports and models developed or se lected by Federa l Reserve staf f , appl ied in a consistent

m anner across a l l BHCs. By exam in ing a l l 19 BHCs simu l tan eou sly, the Federa l Reserve was able to

enhance i ts ins t i tu t ion -speci f i c ana lysis w i th in fo rm at ion abou t peers , app ly ing consisten t assumpt ions



and bring ing a cross-f i rm perspect ive. For th ese reasons, th e Federa l Reserve 's pro ject ions wo uld be

expected to d i f fe r f rom th e BHCs' p ro jec t ions o f th e i r ow n per f o rm ance under the same se t o f

hypo t he t ica l adverse cond i t ions and wi t h p ro jec t ions made by ou ts ide ana lysts .

The Federa l Reserve wi l l not i fy each BHC of whether or not the Federa l Reserve has any

ob jec t ion t o i ts cap i ta l p lan o r to t he p lanned cap i ta l d is t r ibu t ions in th e p lan .

[ foo tnote ] 9 In CCAR 201 2, BHCs rece ived th is no t i f i ca t ion by M arch 15 , 2012 .[endo f f o o t n o t e9. ]

BHCs are required to

upda t e and re -subm i t t he i r cap i ta l p lans w i th in 30 days i f th e Federal Reserve ob jec ts to th e p lan o r a t

any t im e be fo re the next CCAR exerc ise i f th e BHC or th e Federa l Reserve de t e rm ines tha t t he r e has

been a mate r ia l change in th e f i rm 's r i sk p ro f i le , f inanc ia l cond i t ion , o r co rpor a te s t ruc tu re . If the

Federa l Reserve objects to a capi ta l p lan, a BHC may not make any capi ta l d istr ibut ions unless the

Federa l Reserve speci f ica l ly ind icates i t does not ob ject to the d istr ibut ion.

[ f o o t n o t e ] 1 0 12 CFR 225.8(d ) (4 ) .[endo f f o o t n o t e10.]

The Federa l Reserve may

ob jec t to a l l d ist r ibu t ion s descr ibed in th e p lan , o r jus t to some.

The decis ion to ob ject or not ob ject to a BHC's capi ta l p lan rests on the fu l l range of capi ta l p lanelem ent s evaluated by the Federa l Reserve. One or mo re of a BHC's capi ta l p lan e lemen ts could be

st rong , bu t the Federa l Reserve migh t s t i l l ob jec t to th e f i rm 's p lan based on unaccep tab le pe r fo rm ance

on one or mo re of t he ot her e lem ent s. The Federa l Reserve assessed each BHC's capi ta l p lanning

processes, the governance s t ruc t u re gu id ing those p rocesses, the r i sk m easurem ent and m anagement

systems support ing these processes, as wel l as assessments of whether each BHC is making steady

progress to m ee t regu la to ry cap i ta l standard s agreed to by th e Base l Com m i t t ee on Bank ing Superv ision

("Basel I I I " ) as they would come in to ef fect in the Uni ted States over t ime. The BHC's and Federa l

Reserve 's pro ject ion s of losses, revenu e, expenses, and capi ta l under stre ssed econo m ic condi t ions -

th e s t ress scenar io p ro jec t ions - a re a c r i t i ca l par t o f th is dec is ion , bu t no t th e on ly cons ide ra t ion and

no t in a l l cases th e m ost im por t an t con s ide ra t ion . A BHC cou ld have st ressed cap i ta l ra t ios th a t rem a in

above regu la to ry m in imu m levels and the Federa l Reserve cou ld st i l l ob jec t on o t he r g round s to i ts

cap i ta l p lan and the p lanned d ist r ibu t ions in th e p lan .

As in t he SCAP, t he Federa l Reserve is d isclosing the resul ts o f i ts stress scenario pro ject io ns,

includ ing f i rm-speci f ic resul ts based on the pro ject ions made by the Federa l Reserve of each BHC's

losses, revenu es, expen ses, and capi t a l ra t ios over the p lanning ho rizon. The stress scenario resul ts

p rov ide a d ist inc t pe rspect ive on the cap i ta l st r eng th o f th ese f i rm s under a hypo th e t ica l s t ressed

env i ron m ent because they inco rpora t e de ta i led in fo rm at ion abou t t he r i sk characte r is t i cs, b us iness

act iv i t ies, and current and h istor ica l performance of the BHCs. Together, the aggregate and BHC-speci f ic



resu lts i l l us t ra te th e sca le o f the overa l l p ro jec ted ou t com es under t he s t ress scenar io as w e l l as th e

degree of d i f ferent ia t ion of outcomes across BHCs. The d isclosures are a lso in tended to provide

su f f i c ien t in f o rm at ion to genera te feedb ack and d iscussion abou t t he approaches used to genera t e the

resu lts , w i th t he goal o f impr ov ing and re f in ing th e approaches over t im e .

The 2012 Capi ta l Plan Review (CapPR) is an assessmen t o f th e capi ta l p lans and p rop osed capi ta l

ac t ions o f 11 bank ho ld ing comp an ies (BHCs) w i th t o ta l asse ts o f g rea te r th an $50 b i l l i on tha t w ere no t

included in the CCAR,

[ foo tnote ] 1 The BHCs par t ic ipa t ing in th e 2012 CapPR are : BBVA USA Bancshares Inc . , BM O F inanc ia l Corp . , Ci t i zens Financ ia l

Inc ., Com er ica Inc . , D iscover F inanc ia l Serv i ces , HSBC Nor th Am er ica Ho ld ings Inc. , Hun t in g to n Bancshar es Inc. , M & T Bank

Co r p o r a t i o n , No r t h e r n Tr u s t Co r p o r a t i o n , Un io n Ba n Ca l Co r p o r a t i o n , a n d Z io n s Ba n co r p o r a t i o n . RBC USA Ho ld co Co r p .

wa s a cq u i r e d b y a n o t h e r i n s t i t u t i o n d u r i n g t h e Ca p PR p r o ce ss .[endof f o o t n o t e1 .]

In o rder to p rov ide a cons isten t superv iso ry approach , CapPR a t t em pt ed to leve rage

th e CCAR pro cess w her ever possib le . The Federa l Reserve asked each BHC to subm it a com pr ehen sive capi t a l

p lan , w i th in te rna l s t ress tes ts and fo rw ard - look ing cap i ta l p ro jec t ions un der fou r scenar ios : BHC base l ine ,BHC stress, supervisor y basel ine, and supervisor y stress.

[ foo tnote ] 2 The superv isory scenar ios a re the same as those used in the CCAR exerc ise . [endo f f o o t n o t e2. ]

Data subm iss ions r equested f ro m t he CapPR BHCs w ere n o t as ex tens ive comp ared w i th th e CCAR

submissions. Th is re f lec ted a recogn i t ion t ha t th e f i rms had no t been th r ough such a coord in a ted exerc ise

be fo re and tha t t ime migh t be needed to bu i ld and imp lement the in te rna l sys tems necessary to sa t i s fy the

rigorous data co l lect ion requirements needed for a separate supervisory stress test . The Federa l Reserve

evaluated each CapPR BHC's capi ta l p lan submission, focusing on the comprehensiveness of the p lan and the

stren gth of th e BHC's capi ta l p lanning processes. Super visors cond uct ed quant i ta t ive assessm ent s t o evaluat e

th e f ram ew ork , approach and cons is tency o f each BHC's st ress tes t resu l ts , com par ing r esu l ts to h isto r ical

pe r fo rmance and peer ins t i tu t ions.

The Federa l Reserve del ivered a super visory response to each CapPR BHC based on an assessm ent o f

th e com prehen s iveness and qua l i ty o f t he BHC's cap i ta l p lan and the p ro fo rm a, post -st r ess cap i ta l r a t ios f rom

th e BHC's in tern al str ess tests. The resul ts o f the CapPR process w i l l not be pu bl ic ly d isclosed largely because

the Federa l Reserve d id not conduct an independent supervisory stress test for the CapPR BHCs. [endo fbox.]



III. Sup erv isory St ress Scenari o

The "Superv isory Stress Scenar io" was developed by the Federal Reserve and prov ided to the 19

BHCs to use in th e pr oject io ns inc lud ed in their CCAR 2012 capi t a l p lans.

[ foo tnote ] 11 I n a d d i t i o n t o t h e Su p e r v i so r y S t r e ss Sce n a r i o , t h e F e d e r a l Re se r ve a l so d e v e lo p e d a Su p e r v i so r y Ba se l i n e

Sce n a r i o t h a t b r o a d l y f o l l o ws t h e co n se n su s o u t l o o k f r o m t h e B lu e Ch ip Eco n o m ic I n d i ca t o r s a n d o t h e r so u r ce s a s

o f m id - No ve m b e r 2 0 1 1 . T h e BHCs p a r t i c i p a t i n g i n t h e CCAR 2 0 1 2 we r e i n s t r u c t e d t o m a ke p r o j e c t i o n s b a se d o n

both the Superv isory St ress and Superv isory Base l ines scenar ios , as we l l as on s t ress and base l ine scenar ios tha t

e a ch f i r m d e ve lo p e d i n d e p e n d e n t l y ( t h e " BHC St r e ss" a n d " BHC Ba se l i n e " sce n a r i o s , r e sp e c t i ve l y ) . Se e F e d e r a l

Re se r ve Sys t e m , " Co m p r e h e n s i ve Ca p i t a l An a l ys i s a n d Re v ie w : Su m m a r y I n s t r u c t i o n s a n d Gu id a n ce " ( No ve m b e r

26, 2011) ava i lab le a t h t t p : / / w w w . f e d e r a l r e s e r v e . g o v / n e w s e v e n t s / p r e s s / b c r e g / b c r e g 2 0 1 1 1 1 2 2 d 1 . p d f f o r

a d d i t i o n a l i n f o r m a t i o n a n d f o r t h e d e t a i l s o f t h e Su p e r v i so r y Ba se l i n e Sce n a r i o . [endo f f o o t n o t e11.]

The scenario was also

re leased pub l icly . G iven cont inued genera l econom ic uncer ta in ty a t th e t im e th a t the scenar io w as

des igned in No vember 2011, includ ing the o n-go ing si tua t ion in Europe and cont inued s t ress in

m or t gage m arkets, the Federa l Reserve be l ieved i t w as prudent t o p rov ide an adverse scenar io tha t w as

suff ic ient ly severe to ensure a r igorous assessment of the BHCs' abi l i ty to wi thstand unexpected losses.

The Superv isory Stress Scenar io features a deep recession in the United States that begins in the four th

quar ter o f 2011 in w h ich the unem ploym ent ra te increases by an amo unt simi la r to tha t exper ienced, on

average, in severe recessions such as th ose in 1973-1975 , 198 1-1982, and 2 007-2009, accom panied by a

no tab le decl ine in g lobal econo m ic act iv i t y . The scenar io also assume s severe asset p r ice decl ines on

domestic and global f inancial assets.

Figures 2 to 6 i l lus t ra te th e hypo thet ical t r a jecto r ies fo r som e o f th e key var iab les descr ib ing

U.S. economic act iv i ty and asset pr ices and global economic growth under the Superv isory Stress

Scenar io. As t he f igures show , real GDP is assum ed to cont ract sharply thr ou gh late 2012, wi t h th e

unem ploym ent ra te reach ing a peak o f jus t over 13 percent in m id-2013. The scenar io assum es tha t

U.S. equi ty pr ices fa l l by 50 percent from their Q3 2011 values through late 2012 and that U.S. house

pr ices fa l l by mo re than 20 percent th r ough t he end o f 2013. Fore ign rea l GDP grow th is a lso assum ed

to cont rac t , w i th grow th s low dow ns in Europe and Asia in 2012.

I t i s imp ort ant to note t hat the Superv isory St r ess Scenar io i s not a forecast , but ra ther a

hyp ot het ical scenario t o be u sed to assess the stren gth and r esil ience of BHC capi tal in a severely

adverse econo m ic envi ro nm ent . The Sup erv isory Str ess Scenario, wh i le unl ikely, represents an

outcome in which the U.S. economy experiences a s igni f icant recession and economic act iv i ty in other

major economies also contracts s igni f icant ly .

Overal l , the Supe rv isory Str ess Scenar io inc ludes tr a jecto r ies for 25 var iables, inc luding 13

var iables captur ing economic act iv i ty , asset pr ices, and interest rates in the U.S. economy and f inancial



marke ts , and th ree va r iab les ( rea l GDP g rowth , i n f l a t i on , and the U.S. / fo re ign cu r rency exchange ra te ) i n

each o f fou r coun t ies /coun t ry b locks ( the eu ro a rea , the Un i ted K ingdom, deve lop ing As ia , and Japan) .

The scenar io s ta r t s i n the Q4 2011 and extends th rough the Q4 2014 , wh ich pe rmi ts ca l cu la t i on o f the

ALLL a t th e end o f 2013 . App end ix A con t a ins a descr ip t i on o f the va r iab les i nc luded in the Super v i so ry

St r ess Scenar io , as w e l l as th e t ra jec to r ies fo r th ose va r iab les be t w een Q4 2011 and Q4 2014 .

F igu r e 2 : Rea l GDP Gr ow th Ra te in the Supe r v i so r y S t r ess Scena r io


F i gu r e 3 : U n e m p l o y m e n t R a t e i n t h e S u p e r v i s o r y S t r e s s Sc e n a r i o




Figure 4: Dow Jones Total Stock M arket Index, End of Qu arter


F i g u r e 5 : N a t i o n a l H o u s e P r i ce I n d e x i n t h e S u p e r v i s o r y St r e s s S c e n a r i o




F i g u r e 6 : R e a l G D P G r o w t h i n F o u r Co u n t r y / C o u n t r y B l o c k A r e a s

i n t h e Su p e r v i s o r y S t r e s s S ce n a r i o


IV. Feder al Reserv e St ress Scenar io Project ion s

Th is sect i on d escr ibes th e appr oach used to gen era t e th e Federa l Reserve 's st ress scenar io

pro ject ions of losses, revenue, expenses, and capi ta l posi t ions for the 19 BHCs part ic ipat ing in CCAR

2012 . These p ro jec t i on s w ere m ade by Federa l Reserve ana lysts us ing i npu t da ta p ro v ided by the 19

BHCs and m ode ls deve lop ed o r se lec ted by Federa l Reserve sta f f . The p ro jec t i ons a re based on th e

Super v i so ry S t ress Scenar io d eve lop ed by th e Federa l Reserve . Th is scenar io i s no t a fo r ecast , b u t ra the r

a hypo th e t i ca l scenar io deve lo ped t o assess th e s t reng th and r es i li ence o f BHC cap i ta l i n a pa r t i cu la r l y

adverse econom ic and f i nanc ia l m arke t env i r onm ent . As such , th e Federa l Reserve 's s t ress scenar io

p ro jec t i ons fo r the 19 BHCs shou ld no t be i n te rp re ted as expected o r l i ke l y ou tcomes fo r these f i rms,

bu t as poss ib le resu l t s under spec i f i c , hypo th e t i ca l , severe l y adverse cond i t i o ns. Oth er t ypes o f s t ressfu l

scenar ios w ou ld be expect ed to genera te d i f f e ren t se ts o f st ress resu l t s . Fu r t he r , because th e

pro jec t i ons a re based on a se t o f s tandar d i zed m ode ls app l i ed to a l l 19 BHCs, th ey w i l l d i f fe r f ro m

p r o j e c t i o n s t h a t t h e i n d i v id u a l B HCs w i l l m a ke o f t h e i r o w n p e r f o r m a n ce u n d e r t h e sam e se t o f

h yp o t h e t i ca l a d ve r se co n d i t i o n s .

The ou tpu t o f the s t ress scenar io p ro jec t i ons a re es t ima tes o f regu la to ry cap i ta l ra t i os fo r each

o f th e 19 BHCs over th e n ine -quar t e r fo rw ard - loo k ing s t ress scenar io ho r i zon . The cap i ta l ra t i os i nc ludeth e ra t i o o f t i e r 1 cap i ta l to r i sk-we igh t ed asse ts ( the t i e r 1 ra t i o ) , th e ra t i o o f to ta l regu la to ry cap i ta l to

r i sk-we igh t ed asse ts ( the to ta l cap i ta l ra t i o ) , the r a t i o o f t i e r 1 cap i ta l to ave r age asse ts ( the t i e r 1

leve rage ra t i o ) ,

[ footnote] 12T ie r 1 ca p i t a l , as d e f i n e d i n t h e Bo a r d ' s Ri sk - Ba se d Ca p i t a l Ad e q u a cy Gu id e l i n e s , i s co m p o se d o f co m m o n a n d



n o n - co m m o n e q u i t y e l e m e n t s , so m e o f wh i ch a r e su b je c t t o l im i t s o n t h e i r i n c l u s i o n i n t i e r 1 ca p i t a l . Se e 1 2 CF R

p a r t 2 2 5 , Ap p e n d i x A , § I I . A . 1 . T h e se e l e m e n t s i n c l u d e co m m o n s t o ckh o ld e r s ' e q u i t y , q u a l i f y i n g p e r p e t u a l

p r e f e r r e d s t o ck , ce r t a i n m in o r i t y i n t e r e s t s , a n d t r u s t p r e f e r r e d se cu r i t i e s . Ce r t a i n i n t a n g ib l e a sse t s , i n c l u d i n g

g o o d w i l l a n d d e f e r r e d t a x a sse t s , a r e d e d u c t e d f r o m t i e r 1 ca p i t a l o r ar e i n c l u d e d su b je c t t o l im i t s . Se e 1 2 CF R p a r t2 2 5 , Ap p e n d i x A , § II .B . T o t a l ca p i t a l co n s i st s o f t i e r 1 ca p i t a l p l u s ce r t a i n su b o r d i n a t e d d e b t i n s t r u m e n t s a n d t h e

a l l o w a n ce f o r l o a n a n d l e a se l o sse s, su b je c t t o ce r t a i n l im i t s .[endo f f o o t n o t e12.]

( the t ie r 1 com m on ra t io ) . As no ted , th e st r ess scenar io p ro jec t ions a re m ade under the Superv iso ry

St ress Scenar io , wh ich inc ludes quar t e r ly t ra jec to r ies fo r U.S. and in te rna t iona l m acroeconom ic and

f in ancia l m arket var iab les. The last h istor ica l period in t he analysis is Q3 2011 and capi t a l ra t ios are

pro jec ted quar t e r ly th r ough Q4 2013 . Tha t i s, th e st ress scenar io ho r izon is th e n ine -quar t e r pe r iod

f rom Q4 2011 to Q4 2013 .

The Federa l Reserve 's pro ject ions assume the p lanned capi ta l act ions included in each BHC's

capi ta l p lan under i ts own basel ine scenario ("BHC Basel ine Scenario").

[ foo tnote ] 13 T h e se ca p i t a l ac t i o n s i n cl u d e b o t h a c t i o n s t h a t a f f e c t c o m m o n e q u i t y a n d a ct i o n s t h a t a f f e ct n o n - c o m m o n e q

ca p i t a l e l e m e n t s , su ch a s ce r t a i n f o r m s o f p r e f e r r e d s t o ck . [endof f o o t n o t e13.]

As a resul t , th e Federa l

Reserve 's pro ject ions do not incorporate any changes in d iv idends, share repurchases, or issuances that

BHCs m ight und ert ake in react io n to str essed f inan cia l cond i t io ns. This conservat ive assum pt ion is part

o f th is supervisory exercise and in pract ice the Federa l Reserve expects BHCs to fo l low the capi ta l

conserva t ion po l i c ies th a t a re pa r t o f the i r cap i ta l p lans. Fo r examp le , the cap i ta l po l i c ies o f some o f t he

BHCs conta in t r iggers or gu ide l ines for reducing capi ta l d istr ibut ions such as d iv idends and share

repur chases in cond i t ion s w here p ro f i t ab i l it y i s reduced and / o r cap i ta l ra t ios fa l l be low ce r t a in in te r na l

target leve ls.

[ foo tnote ] 14 Se e h t t p : / / w w w . f e d e r a l r e s e r v e . g o v / n e w s e v e n t s / p r e s s / b c r e g / b c r e g 2 0 1 1 1 1 2 2 d 1 . p d f f o r a m o r e d e t a i l e d

d e sc r i p t i o n o f t h e Fe d e r a l Re se r ve ' s a sse ssm e n t o f p l a n n e d ca p i t a l a c t i o n s i n CCAR 2 0 1 2 .[endo f f o o t n o t e14.]

The p ro jec ted s t ressed cap i ta l ra t ios eva lua ted in CCAR 2012 re f lect t he com b ined imp act o f th e

stress scenario and each BHC's p lanne d capi ta l d istr ibut ions. To i l lustr a te the im pact o f th e str ess

scenario a lone, the Federa l Reserve a lso ca lcu lated stressed capi ta l ra t ios exclud ing capi ta l act ions

p lanned fo r a f te r Q1 2012 .

[ foo tnote ] 15 T h e r a t i o s a ssu m e p l a n n e d ca p i t a l a c t i o n s t h r o u g h Q1 2 0 1 2 , b u t n o m a t e r i a l ca p i t a l i ssu a n ce s f r o m M a r ch 1 6

t h r o u g h M a r c h 3 1 , 2 0 1 2 .[endo f f o o t n o t e15.]

The resu l t ing st r essed cap i ta l ra t ios cou ld be h igher o r low er th an th ose

inc lud ing a l l the p lanned cap i ta l ac t ions, depend ing on when the two min imum va lues occur ( they cou ld

com e in d i f fe ren t po in ts o f the s t ress scenar io ho r izon) , po t en t ia l d i f f e rences in r i sk-w e igh ted asse ts a t

those po in ts , and whe ther those p lanned act ions rep resen t ne t add i t ions o r reduct ions in regu la to ry

capi ta l .

As a po l icy matter, the Federa l Reserve 's stress scenario pro ject ions embed a number of

conserva t ive assumpt ions tha t , on ne t , a re li ke ly to fu r t he r r educe the p ro jec ted leve ls o f r egu lato r y



cap i ta l under the Super v i so ry St ress Scenar io . These assum pt ions o f t en i nvo l ve si tua t i ons i n w h ich t he r e

i s co n s id e r a b l e u n ce r t a i n t y a b o u t t h e i m p a c t o f t h e h yp o t h e t i ca l a d ve r se e co n o m i c a n d f in a n c i al m a r ke t

cond i t i ons i n th e Super v i so ry St ress Scenar io on p a r t i cu la r aspects o f th e BHCs' pe r fo r m ance . In som e

cases, th i s uncer ta in t y a r i ses because h i s to r i ca l da ta p rov ide l im i ted gu idan ce abou t t he l osses o r

revenue be ing p ro jec ted , wh i l e i n o the r cases, the cu r ren t s ta te o f mode l i ng techn ique and p ract i ce

resu l t s in l im i ta t i ons on the p rec i s ion o f i ndep enden t sup erv i so ry m ode ls . In th ese cases, as a po l i cy

m a t t e r , t h e Fe d e r al Re se r ve o p t e d t o i n co r p o r a t e s i mp l i f y in g , co n ser va t i ve m o d e l i n g a ssu mp t i o n s t h a t

tend to genera te h igher p ro jec t i ons o f l oss and lower p ro jec t i ons o f revenue .

The Federa l Reserve 's st ress scenar io p ro jec t i ons addr ess th e on -go ing s i tua t i on i n Euro pe

th rough severa l channe ls . The Superv i so ry S t ress Scenar io i nco rpora tes a hypo the t i ca l sha rp downtu rn

in econo m ic act i v i t y i n th e Euro a rea , and the g loba l f i nanc ia l m arke t shock app l i ed to t rad ing , p r i va te

equ i t y , and de r i va t i ves po s i t i ons o f th e l a rgest BHCs inc ludes ve ry s ign i f i can t w iden in g o f c red i t de fau l t

swap sp reads fo r bo th European sovere igns and f i nanc ia l i ns t i tu t i ons and sharp i ncreases i n sp reads

across t he y ie ld cu rve fo r European sover e ign bon ds. These st r esses a f fec t m any aspects o f th e s t ress

scenar io p ro jec t i ons, i nc lud ing p ro jec ted l osses on i n te rna t i ona l l end ing po r t fo l i os , on sovere ign and

f inanc ia l i ns t i tu t i on bonds he ld i n the BHCs' i nvestmen t po r t fo l i os , and on t rad ing , p r i va te equ i t y , and

der i va t i ves pos i t i ons.

IV.A Analytical Fram ework

Th is sect i on descr ibes the ana ly t i ca l f ramework under l y ing the Federa l Reserve 's s t ress scenar io

p r o j e c t i o n s . T h e b a si c a p p r o a ch i s t o p r o j e c t t h e i mp a c t o f t h e a d ve r se e co n o m i c e n v i r o n m e n t i n t h e

Superv i so ry S t ress Scenar io on the quar te r l y ne t i ncome o f each BHC, and then to ca r ry fo rward the

impact o f ne t i ncome and each BHC's p lanned cap i ta l ac t i ons on regu la to ry cap i ta l measures i n eve ry

quar t e r o f th e st r ess scenar io ho r i zon . Th is appr oach p rov ide s a pe rspect i ve o n th e cap i ta l o f th e BHCs

tha t i s cons i s ten t w i th U.S . accoun t ing (GAAP) and regu la to ry cap i ta l ru les and on the p r imary d r i ve rs o f

the p ro jec ted changes in cap i ta l th rough earn ings and cap i ta l ac t i ons.

To genera te p ro jec t i ons o f ne t i ncome fo r the 19 BHCs, p ro jec t i ons a re made fo r revenue ,

expenses, and va r iou s t yp es o f l osses and p r ov i s ions th a t f l ow in to p re - tax ne t i ncom e, i nc lud ing l osses

on loans and investmen t secur i t i es , l osses genera ted by opera t i ona l r i sk even ts , expenses re la ted to

d e m a n d s b y mo r t g a g e i n ve st o r s t o r e p u r ch a se l o a n s d e e m e d t o h a ve b r e a ch e d r e p r e se n t a t i o n s a n d



warran t ies o r re la ted to l i t i ga t ion ( "mor tgage repurchase /pu t -back losses" )

[ foo tnote ] 16 T h e se e st i m a t e s ar e c o n d i t i o n a l o n t h e h y p o t h e t i c al a d v e r s e m a c r o e c o n o m i c s ce n a r i o a n d o n c o n s er v a t i v e

a ssu m p t i o n s . T h e y a r e n o t a su p e r v i so r y e s t im a t e o f t h e cu r r e n t l e g al l ia b i l i t y t h a t BHCs m ig h t a c t u a l l y f a ce .[endo f f o o t n o t e16

changes in th e incom e

fr om m ort gage servic ing r ights (M SRs), and, for BHCs w i th large tr ad ing op erat ions, losses on tr ad ing

and coun te r par ty pos i t ions under a severe shock to g loba l f inanc ia l marke t ra tes and p r ices. Pro jected

ne t incom e in tu rn f low s in to a ca lcu la t ion o f r egu lato r y cap i ta l m easures, tak ing accoun t o f t axes and

deduct ions tha t l im i t the recogn i t ion o f ce r ta in in tang ib le asse ts and impo se o the r res t r i c t ions, as

speci f ied in current U.S. regulatory capi ta l gu ide l ines.

[ foo tnote ] 17 See genera l ly , 12 CFR par t 225 , Append ix A. [endof f o o t n o t e17.]

As no t ed above , th e p ro jec ted cap i ta l m easures

also incor por ate each BHC's p lanned capi ta l act ions under i t s ow n basel ine scenario . The Box on page

15 i ll ust ra t es how th e var ious e lement s o f th ese ca lcu la t ions lead to p ro jec ted ne t income and th en to

p ro jec ted changes in regu lato r y cap ita l .

Since th e st ress scenar io p ro jec t ions a re in ten ded to p rod uce est im a tes o f regu la to ry cap ita l

ra t ios, the loss and revenue pro ject ions fo l low U.S. GAAP and regulatory gu ide l ines. This approach

captures d i f ferences in the way that income and losses are recognized based on where assets are he ldon th e BHCs' ba lance shee ts , genera t ing somet imes g rea t ly d i f f e ren t loss p ro jec t ions fo r s im i la r o r

ident ica l assets he ld in d i f f eren t p ort fo l io s. Speci f ica l ly, losses on loans held in accrual por t f o l ios are

calcu lated as credi t losses due to fa i lure to pay obl igat ions (cash f low losses resul t ing in net charge-offs),

ra the r t han d iscoun ts re la ted to m ark- to -m arke t va lues. In som e cases, BHCs may have loans th a t a re

being held fo r sale or th at are subject t o pu rchase accoun t in g adjustm ent s. In th ese cases, loss

pro jec t ion s an t ic ipa te the change in va lue o f the und er ly ing asset , app ly the appr opr ia t e accoun t ing

t r ea tm ent , and de te rm ine th e increm enta l loss. Separa te loss p ro jec t ion s a re m ade fo r d i f fe ren t

ca tegor ies o f loans based on th e type o f o b l igo r (e .g. , consum er o r com m erc ia l and indust r ia l ), co l la te ra l

(e .g. , resident ia l rea l estate, commercia l rea l estate), or loan structure (e .g. , revo lv ing credi t l ines).

These ca tegor ies genera l l y fo l low th e m a jo r regu la to ry repor t c lassi f i cat ions, tho ugh som e loss

pro jec t ion s are m ade fo r m ore g ranu la r loan ca tegor ies th an tho se included on BHC regu la to ry repor t s .

[ foo tnote ] 18 Se e Co n so l i d a t e d F in a n c ia l St a t e m e n t s f o r Ba n k Ho ld i n g Co m p a n ie s ( FR Y-9 C) .[endo f f o o t n o t e18.]

Losses on securi t ies he ld in t he avai lab le for sa le (AFS) or he ld to m atu ri t y (HTM ) accoun ts

inc lude o the r - than- t em por a ry imp a i rm en ts (OTTI) fo r these pos it ions p lus es t ima tes o f rea l i zed gains o r

losses on certa in securi t ies sa les. Fol low ing U.S. GAAP, OTTI pro ject io ns incorp orat e o th er-t han-

tempora ry d i f fe rences be tween book va lue and fa i r va lue due to c red i t impa i rmen t , bu t no t d i f fe rences

re f lec t ing changes in l iqu id i ty o r m arke t cond i t ions. As w i th th e accrua l loan por t fo l io , loss p ro jec t ions

are made fo r d i f fe ren t ca tegor ies o f secur i t ies based on ob l igo r , co l late ra l o r under ly ing cash f low , and



secur i ty s tructure. These categor ies inc lude var ious types of secur i t ized obl igat ions (e.g., commercial

and res identia l mortgage-backed secur i t ies) , corporate bonds, munic ipal bonds, and sovereign bonds.

Est imates of real ized gains or losses on secur i t ies sales are der ived from information prov ided by the

BHCs on th e sale of secur i t ies un der con tr acts in p lace pr ior t o Sept em ber 30, 2011.

Project ing Net Income and Regulatory Capi ta l

N e t I n t e r e s t I n c o m e + N o n - i n t e r e s t I n c o m e - N o n - i n t e r e s t Ex p e n s e

= Pre -p rov i s i on Ne t Revenue (PPNR)Not e: PPNR inc ludes Losses f ro m Op erat ional Risk Event s , Mo r t gage Put-b ack Losses, and

OREO Costs.

[then]

P PNR + O t he r Rev en ue - P r ov i s i on s - A FS/ HTM Sec u r i t i es Los ses -

T r ad ing and Coun t e r p a r t y Los ses - O t he r Los ses ( Gains )

= P r e - t a x N e t I n c o m eNote: Change in the Al lowance for Loan and Lease Losses + Net Charge-of fs

= Provisions.

[then]

Pr e - t a x N e t I n c o m e - T a x e s + Ex t r a o r d i n a r y I t e m s N e t o f T a x e s

= A f t e r - t a x N e t In c o m e .

[then]

A f t e r - t a x N et I n c o m e - N e t D i st r i b u t i o n s t o Co m m o n a n d Pr e f e r r e d

S h a r e h o l d e r s a n d O t h e r N e t R e d u c t i o n s t o S h a r e h o l d e r ' s E q u i t y

= Change i n Equ i t y Capi ta l .

[then]

Ch a n g e i n Eq u i t y Ca p i t a l - D e d u c t i o n s f r o m Re g u l a t o r y Ca p i t a l + O t h e r

A d d i t i o n s t o R e g u l a t o r y C a p i t a l

= Ch a n g e i n Re g u l a t o r y Capi ta l .



For the six BHCs wi th large trad ing operat ions, losses on trad ing, derivat ives, and pr ivate equi ty

pos i t ions a re p ro jec ted assum ing an ins tan taneous r e -p r ic ing under a "g loba l f inanc ia l marke t shock. "

The g lobal f inancia l market shock was developed by the Federa l Reserve and ref lects a period of

sign i f icant stress across a very broad range of markets and asset c lasses simi lar to that which occurred

during the second hal f o f 2008, as wel l as addi t ional stresses re la ted to the on-going si tuat ion in Europe.

The g lobal f inancia l market shock is d ist inct and separate from the Supervisory Stress Scenario in that i t

presumes a set o f severe, instantaneous changes in market ra tes, pr ices, and vo lat i l i t ies that are in

effect layer ed over t he f inancia l mar ket variab les cont a ined in th e Super visory Str ess Scenario . Losses

re la ted to th e g loba l f inanc ial m arke t shock a re assum ed to occur in th e f i rst quar t e r o f th e s t ress

scenar io p ro jec t ion s (Q4 2011) . These losses inc lude m ark- to -m arke t and increment a l de fau l t - re la ted

losses on each of th e six BHCs' t r ad ing and pr ivat e equi t y po si t ions, as w el l as changes in cred i t va luat ion

ad jus tm en t s (CVA) fo r coun t e rpar t y exposures. It is imp or t an t to cap tu r e th e impact o f coun te rp ar ty

cred i t r i sk because p ro jec ted m ark- to -mark e t losses on the t rad ing accoun t can be reduced i f t r ad ing

pos i t ions are hedged , bu t the e f fec t i veness o f th ese hedges depends on coun te r par ty pe r fo rm ance on

th e ob l igat ions. Th is impact i s cap tu red t h ro ugh the s t ress app l ied to coun te rp ar ty c red i t exposures.

Pre-provis ion net revenue (PPNR) is ca lcu lated as pro jected net in terest income p lus non-

in t erest incom e minus non-in ter est expense. Consistent w i th U.S. GAAP, PPNR pro ject io ns of non-

in te res t expense inco rpora t e p ro jec ted losses re lated to opera t iona l r i sk even ts such as f raud , com put e r

sys tem o r o the r o pera t ing d is rup t ions, o r emp loyee lawsu i ts ; repurchase and l i t i gat ion expenses re la ted

to res iden t ia l mor tgages; p r o jec ted changes in incom e f rom m ort gage serv ic ing r igh ts ; and expenses

re la ted to th e d isposi t ion o f fo rec losed p ro per t ies (o the r rea l es ta te ow ned (OREO) expenses) .

Pro jected ne t incom e inco rpo ra tes p rov is ions in to th e a l lowance fo r loan and lease losses

(ALLL). Provis ions are deter m ined so that t he ALLL is a t an appr op ria t e leve l at the end of each quar ter

g iven p ro jec ted loan losses in tha t q uar te r , w here t he appro pr ia te level o f the ALLL is a fun ct ion o f

pr o ject ed fu t ur e loan losses. This ca lcu lat ion co uld lead e ith er to a dr aw do w n of the ALLL (an ALLL

re lease, increasing net income) or the need to bu i ld the ALLL (an addi t ional provis ion, decreasing net

income) during the quarter. Tota l provis ions in to the ALLL are ca lcu lated as pro jected loan losses for the

quar t e r p lus o r m inu s th e amou n t needed fo r th e ALLL to be a t an approp r ia te leve l at the end o f t he

q u a r te r .

The Federa l Reserve 's fo r w ard - look in g p ro jec t ions o f incom e and losses may inc lude th e e f fec ts

o f p lanned m ergers o r acqu isi t ions o r th e in i t ia t ion o f new bus iness l ines o r ac t i v i t ies th a t w ere inc luded

in the BHCs' capi ta l p lans and are subject to pr ior approval or not ice by the Federa l Reserve or o ther



superv i so rs . The inc lus ion o f th e e f fec ts o f such p lanned act i ons does no t , and i s no t i n t ended t o ,

e xp r e ss a v i e w o n t h e m e r i t s o f su ch p r o p o sal s an d i s n o t a n a p p r o va l o r n o n - o b j e c t i o n t o t h e m .

The f i na l p ro jec t i on o f p re - tax ne t i ncome equa ls the p ro jec t i on o f PPNR minus p rov i s ions minus

pro jec ted l osses on secur i t i es and losses f ro m t he g loba l f i nanc ia l m arke t sho ck ( fo r the s i x BHCs w i t h

la rge t rad ing opera t i ons) minus l osses on l oans he ld fo r sa le and measured under the fa i r va lue op t i on .

Pre - tax ne t i ncome p ro jec t i ons a l so i nco rpora te one- t ime revenues and expenses and goodwi l l

im pa i rm en t char ges, as p ro jec ted by th e BHCs in th e i r cap i ta l p lans. A f t e r - t ax ne t i ncom e i s ca l cu la ted

by app ly ing a cons is ten t t ax ra te to p re - tax ne t i ncom e fo r a l l BHCs. A long w i th each BHC's p lanned

cap i ta l ac t i ons (d i v idend payments , repurchases o r redempt ions, and i ssuance o f common equ i t y o r

o t h e r ca p i t a l i n s t r u m e n t s ) , af t e r - t a x n e t i n co m e i s t h e p r i m a r y d r i ve r o f p r o j e c t e d ch a n g e s in e q u i t y

cap i ta l , wh ich i n tu rn d r i ves p ro jec ted changes in the regu la to ry cap i ta l measures tha t a re the f i na l

ou t pu t o f th e Federa l Reserve 's st r ess scenar io p ro jec t i ons. Cap i ta l ra t i os a re ca l cu la ted u s ing average

to ta l asse ts and r i sk-w e igh ted asse ts th a t a re based on p ro jec t i ons m ade by the BHCs as pa r t o f th e i r

CCAR 2012 capi ta l p lan submissions under the Supervisory Stress Scenar io .

IV.B Modeling Design and Implementa tion

The Federa l Reserve 's st ress scenar io p ro jec t i ons a re based on inpu t d a ta p ro v ided by th e 19

BHCs par t i c i pa t i ng i n CCAR 2012 and o n m ode ls dev e loped o r se lec ted by Federa l Reserve sta f f and

rev iewed by an i ndependen t g roup o f Federa l Reserve economis ts and ana lys ts . The mode ls a re

i n t e n d e d t o ca p t u r e t h e i mp a c t o f t h e ma c r o e co n o m i c a n d f i n a n c i al m a r ke t f ac t o r s i n c l u d e d i n t h e

Super v i so ry St r ess Scenar io an d characte r i s t i cs o f th e BHCs' l oans and secur i t i es po r t fo l i os ; t rad ing ,

p r i va te equ i t y , and de r i va t i ves pos i t i ons; bus iness act i v i t i es ; and o the r fac to rs a f fec t i ng l osses, revenue ,

and expenses. Th is sect i on d escr ibes th e i npu t d a ta p rov id ed by the BHCs and the app ro ach the Federa l

Re se r ve t o o k i n d e si g n in g a n d i m p l e m e n t i n g t h e se m o d e l s .

BHC Input Data

The 19 BHCs par t i c i pa t i ng i n CCAR 2012 w ere r equ i red t o subm i t ex ten s i ve da ta to t he Federa l

Reserve on a se r ies o f regu la to ry repor ts .

[ foo tnote ] 19 T h e se r e p o r t f o r m s a r e t h e F R Y- 1 4 Q a n d FR Y- 1 4 A r e p o r t s , wh i ch ca n b e f o u n d a t

h t t p : / / w w w . f e d e r a l r e se r v e .g o v / r e p o r t f o r m s / f o r m s r e v i ew / F RY1 4 Q 2 0 1 1 1 2 1 6 f . p d f an d

h t t p : / / w w w . f e d e r a l r e se r v e .g o v / r e p o r t f o r m s / f o r m s r e v i ew / F RY1 4 A 2 0 1 2 0 1 1 8 f . p d f.[endo f f o o t n o t e19.]

T h e r e p o r t s ca p t u r e i n f o r m a t i o n o n t h e B HCs ' lo a n a n d

secur i t i es po r t fo l i os as o f Sep tember 30 , 2011 , i nc lud ing bo r rower characte r i s t i cs , co l l a te ra l



characte r is t i cs, characte r is t i cs o f th e loans o r cred i t fac i l i t i es, am oun t s ou ts tand ing and ye t to be d raw n

dow n ( fo r c red i t l i nes) , and paym ent h isto ry and cu rren t s ta tus . In some cases (p r imar i l y re ta i l c red i t

po r t fo l ios), aggrega ted in f o rm at ion i s repor t ed based on segm ents o f the loan por t fo l ios (e.g. , segment s

de f ined by loan- to -va lue (LTV) ra t io , geograph ic loca t ion , and bo rrow er c red i t sco re ) , w h i le in o the r

cases, in for m at ion is co l lected o n ind iv idu al loans or cred i t f aci l i t ies. For securi t ies he ld in th e AFS and

HTM por t fo l ios , in fo rm at ion i s co l lected a t the ind iv idua l secur i ty (CUSIP) level , inc lud ing the amo rt i zed

cost , m arke t va lue , and any OTTI taken on the secur i ty to da te .

Add i t iona l repor ts co l lec t in fo rmat ion on t rad ing and der iva t i ves pos i t ions, p r i va te equ i ty

ho ld ings, and ce r t a in o the r asse ts sub jec t t o fa i r va lue accoun t ing he ld by BHCs w i th la rge t r ad ing

opera t ions. These repor t s co l lec t BHC-est im a ted sens it i v i t ies o f these pos i t ions to t he set o f r i sk facto rs

speci f ied by th e Federa l Reserve, includ ing changes in a w ide r ange of U.S. and global f inan cia l m arket

rat es and asset p r ices, and vo lat i l i t ies and cor re la t ions of tho se rates and pr ices. The speci f ic r isk facto rs

a re th ose jud ged to be m ost re levan t to t he po s it ions he ld by the BHCs. The repor t s a lso co l lec t

in fo r m at ion on th e est im a ted sensi t i v i ty o f the BHCs' coun t e rpar t y - re la ted p ro f i t o r loss to th ese r i sk

fac to rs , bo t h fo r segment s o f th e po r t fo l io and fo r ind iv idua l large coun t e rpar t ies. These da ta are used

in pro ject ing losses re la ted to the g lobal f inancia l market shock, includ ing losses re la ted to derivat ives

and o the r coun t e rpar t y exposures. These da ta w ere co l lected fo r pos i t ions in th e t r ad ing and p r iva te

equ i ty po r t fo l ios he ld by th e BHCs as o f m arke t c lose on No vemb er 17 , 2011 .

[ foo tnote ] 20 T h e BHCs we r e i n f o r m e d o f t h e p o r t f o l i o d a t e f o r t h e g l o b a l m a r ke t r i s k a n a l ys i s wh e n t h e CCAR 2 0 1 2

i n s t r u c t i o n s w e r e r e l e a se d o n N o v e m b e r 2 2 , 2 0 1 1.[endof f o o t n o t e20.]

A f ina l set o f repor ts co l lec ts in fo rm at ion on h isto r ical and p ro jec ted revenues and opera t ing

and o the r non-cred i t - re la ted expenses fo r each BHC. Th is in fo rm at ion inc ludes da ta on ne t in t e rest

income, non-in terest income, and expenses by business l ine, as wel l as a series of metr ics (ba lances,

vo lum es o f t r ades and t ransact ions, assets under m anagem ent , fee schedu les, com pensa t ion expenses)

re la t ed to a range of business act iv i t ies con duct ed by th e BHCs. Data are also co l lected on th e BHCs'

h istor ica l losses re la ted to operat ional r isk events. These data, both h istor ica l and the BHCs' pro ject ions

o f these am oun t s over the s t ress scenar io ho r izon , wer e used in deve lop ing the Federa l Reserve 's

pr o ject ions of PPNR for th e 19 BHCs. Fina l ly, th e report s co l lect in fo rm at ion o n t he BHCs' pro ject ions of

r isk-weighted assets, ba lance sheet composi t ion, and capi ta l over the stress scenario horizon.

A l l 19 BHCs par t i c ipat ing in CCAR 2012 w ere requ i red to subm i t th ese regu lato r y r epor ts to t he

Federa l Reserve by e i the r la te December ( fo r fo rm s con t a in ing de ta i led loan and secur i t ies po r t fo l io



i n fo rmat ion ) o r ea r l y January ( fo r fo rms con ta in ing BHC-der i ved est ima tes) .

[ foo tnote ] 21 Sp e c i f i ca l l y , t h e BHCs w e r e r e q u i r e d t o su b m i t t h e FR Y- 1 4 Q r e p o r t s ( co n t a i n i n g , am o n g o t h e r i t e m s , d e t a i l e d

l o a n a n d se cu r i t i e s p o r t f o l i o i n f o r m a t i o n ) b y De ce m b e r 1 5 , 2 0 1 1 . T h e BHCs w e r e r e q u i r e d t o su b m i t t h e FR Y- 1 4 A

r e p o r t s ( co n t a i n i n g , a m o n g o t h e r i t e m s , t h e BHC- d e r i ve d e s t im a t e s ) b y Ja n u a r y 9 , 2 0 1 2 .[endo f f o o t n o t e21.]

BHCs were requ i red to

su b mi t d e t a i l e d l o an a n d secu r i t i e s p o r t f o l i o i n f o r m a t i o n f o r a ll ma t e r i a l p o r t f o l i o s , w h e r e "m a t e r i a l "

was de f i ned as those po r t fo l i os exceed ing e i the r 5 pe rcen t o f t i e r 1 cap i ta l o r $5 b i l l i on and the po r t fo l i o

ca t e go r i e s we r e d e f i n e d o n t h e r e g u l at o r y r e p o r t s . Fo r p o r t f o l i o s f a l li n g b e l o w t h e se t h r e sh o l d s , t h e

BHCs had th e op t i on to subm i t o r no t subm i t the de t a i l ed data . Por t fo l i os fo r wh ich the Federa l Reserve

d id no t rece ive de ta i l ed da t a wer e assigned a l oss ra te equa l to a h igh pe r cen t i l e o f th e l oss ra tes

p ro jec ted fo r BHCs th a t d id subm i t da ta fo r th a t ca tegory o f l oan o r secur i t y . Fo r i nstances w her e

cer ta in da ta e lements were repor ted as miss ing va lues, these miss ing da ta were f i l l ed i n w i th

conserva t i ve va lues (e .g ., h igh LTV va lues o r l ow cred i t sco res) based on th e rem a inder o f th e p o r t fo l i o .

The s t ress scenar io p ro jec t i ons may inc lude the e f fec ts o f p lanned mergers o r acqu is i t i ons o r the

in i t ia t io n of new bu siness l ines, as rep or te d by BHCs in th e i r CCAR 2012 capi t a l p lans. BHCs w i th

s ign i f i can t p lanned mergers o r acqu is i t i ons p rov ided ava i l ab le i n fo rmat ion on the characte r i s t i cs o f theins t i tu t i on s o r po r t fo l i os to be acqu i red . As no t ed above , th e i nc lusion o f th e e f fec ts o f such p lanned

act ions does no t and i s no t i n t ended t o exp ress a v iew on the m er i t s o f such p r opo sa ls and i s no t an

a p p r o va l o r n o n - o b j e c t i o n t o t h e m.

Loss, Revenue, and Expense M odels

The da ta co l l ec ted f r om th e BHCs, a long w i t h the va r iab les de f i n ing th e Super v i so ry St ress

Scenar io , are inputs in to a ser ies of models used to pro ject losses, revenues, and expenses for each BHC

over the s t ress scenar io h o r i zon . In m ost cases, th ese mo de ls w ere e i the r deve loped by Federa l Reserve

ana lys ts and econom is ts o r a re vend or -deve lo ped m ode ls used by Federa l Reserve s ta f f . I n som e cases,

how ever , the s t ress scenar io p ro jec t i ons o f ce r ta in t ypes o f l osses o r reven ue m ade by the Federa l

Reserve re l y on sens i t i v i t i es genera ted by the BHCs us ing the i r i n te rna l r i sk measurement mode ls o r on

mode led est ima tes p rov ided by the BHCs, a long w i th suppor t i ng documenta t i on , and assessed and

ad justed by Federa l Reserve ana lys ts . These are cases in w h ich i nd epen den t super v i so ry m ode ls a re

e i the r no t ye t su f f i c i en t l y robust to genera te re l i ab le es t ima tes o r a re techn ica l l y and log i s t i ca l l y

e x t r e m e l y d i f f ic u lt t o i m p l e m e n t .

[ foo tnote ] 22 T h e p r im a r y e xa m p le s a r e m o d e l s d e s i g n e d t o ca p t u r e t h e im p a c t o f ch a n g e s t o g l o b a l f i n a n c ia l m a r ke t r a t e s

p r i c es o n t r a d i n g , p r i v a t e e q u i t y , a n d d e r i v a t i v e s p o s i t i o n s, w h e r e d e v e l o p i n g f u l l y i n d e p e n d e n t r e v a l u at i o n m o d e l s

t h a t ca n ca p t u r e t h e r a n g e o f co m p le x i n s t r u m e n t s a n d p o s i t i o n s h e ld b y t h e BHCs i s a n e x t r e m e l y d i f f i cu l t

u n d e r t a k i n g , a n d m o d e l s t h a t ca n ca p t u r e t h e BHC- sp e c i f i c f a c t o r s d e t e r m in i n g t h e va r i o u s e l e m e n t s o f PPNR. [endof f o o t n o t e



In genera l , th e mo de ls w ere deve loped us ing poo led h is to r ica l da ta f rom m any f inanc ia l

ins t i tu t ions, e ithe r superv iso ry da ta co l lected by th e Federa l Reserve o r da ta pu r chased f ro m indust ry

da ta aggregato r s . The mod e ls a re th us " indust ry m ode ls" in th e sense th a t the est im a ted paramet e rs

re f lec t the typ ica l o r indust ry -average response to va r ia t ion in th e m acroeconom ic and f inanc ia l m arke t

va r iab les and por t fo l io -speci f i c and ins t rum ent -spec i f i c characte r is t i cs, ra th e r than be ing ta i lo r ed to t he

w ay t hat each ind iv idu al BHC's losses, reven ues, or expenses m ight respon d t o th ese facto rs. Th is

approach r e f lects no t on ly the d i f f i cu l ty o f es t im a t ing separa te , sta t i s t i ca ll y rob ust m ode ls fo r each o f

the 19 BHCs, but a lso the desire not to assume that h istor ica l BHC-speci f ic resul ts wi l l prevai l in the

fu t u re w hen tho se resu l ts canno t be exp la ined by cons is ten t ly ob servab le va r iab les inco rpor a ted in to a

robu st sta t i s t i cal m ode l . Thus, BHC-spec i f i c fac to rs a re inco rpo ra ted t h ro ugh the de ta i led po r t fo l io and

bus iness ac t i v i ty da ta tha t a re inpu ts to the m ode ls , bu t the react ion fu nct ion s to t hese var iab les and to

th e m acroeconom ic and f inanc ial m arke t fac to rs de f ined in th e Superv iso ry St ress Scenar io a re th e same

fo r a l l BHCs. This m eans th at th e str ess scenario pro ject ion s made by the Federa l Reserve w i l l not

necessar i l y m a tch o r m i r ro r s im i la r p ro jec t ions m ade by ind iv idua l BHCs, wh ich wi l l i nco rpor a te d ive rse

approaches to cap tu r ing the impact o f po r t fo l io characte r is t i cs and economic fac to rs .

The m ode ls deve loped in te rna l l y by th e Federa l Reserve d raw o n academ ic l i te ra tu re and

indust ry p rac t i ce in mode l ing the impact o f bo rrower , ins t rument , and co l la te ra l characte r is t i cs and

m acroeconom ic fac to rs on losses, revenue , and expenses. The approaches bu i ld on w ork do ne by the

Federa l Reserve in t he SCAP and th e 2011 CCAR, but in many cases represent s ign i f icant re f inem ent and

advancement o f tha t work , re f lec t ing advances in mode l ing techn ique , r i che r and more de ta i led da ta

over wh ich to es t ima te the mode ls , and longer h is to r ies o f pe r fo rmance in bo th adverse and more

ben ign econom ic set t ings. The m ode ls w ere rev iewed by an independen t m ode l rev iew team com posed

of economists and analysts f rom across the Federa l Reserve System, wi th a focus on the design and

est im at io n of t he m odels. In addi t ion, Federa l Reserve analysts develope d indu stry-w ide loss and PPNR

pro jec t ion s cap t u r ing the po t en t ia l loss and r evenue-genera t ing ra tes o f the bank ing indust ry as a who le

in a s t ressed m acroeconom ic env i ronm ent , fo r use as re fe rence po in ts in assess ing m ode l o u tp u ts

across the 19 BHCs.

The models used in the stress scenario pro ject ions are described in greater deta i l in Appendix B.



V. St ress Scenar io Project ion s

Th is sect i on p resen ts the Federa l Reserve 's st ress scenar io p ro jec t i o ns. As descr ibed above ,

th ese resu l t s are based on p ro jec t i on s o f l osses, revenues, expenses, and cap i ta l m ade by Federa l

Reserve ana lys ts us ing i npu t da ta supp l i ed by th e BHCs and a se t o f m ode ls deve lop ed o r se lected by th e

Federa l Reserve . The p ro jec t i ons o f BHC per fo r m ance a re based on an un l i ke l y , hypo t he t i ca l adverse

econo m ic scenar io ( t he Super v i so ry St ress Scenar io ) , wh ich assum es a deep r ecession i n the Un i ted

Sta tes, a sign i f i can t s low dow n in g loba l econo m ic ac t i v i t y , and sharp fa l l s i n asse t p r i ces and increases i n

r i sk p rem ia . The p ro jec t ed s t ressed cap i ta l ra t i os eva lua ted i n CCAR 2012 em bed th e p lanned cap i ta l

act ions f rom each BHC's CCAR 2012 capi ta l p lan. These rat ios are the resul ts o f a conservat ive po l icy

assessment o f the BHCs' ab i l i t y to ma in ta in the i r p lanned base l i ne cap i ta l d i s t r i bu t i ons even i f economic

cond i t i ons wer e to de t e r io r a te s ign i f i can t l y . To i ll us t ra te the imp act o f th e st ress scenar io a lone , th e

Federa l Reserve a l so ca l cu la ted s t r essed r egu la to ry cap i ta l ra t i os exc lud ing p lann ed cap i ta l ac t i on s a f te r

Q1 2012 .

[ foo tnote ] 23 T h e r a t i o s a ssu m e p l a n n e d ca p i t a l a c t i o n s t h r o u g h Q1 2 0 1 2 , b u t n o m a t e r i a l cap i t a l i s su a n ce s f r o m M a r ch 1 6

t h r o u g h M a r c h 3 1 , 2 0 1 2 .[endo f f o o t n o t e23.]

The sect i on beg ins by p resen t ing the s t ressed cap i ta l ra t i os - th e t i e r 1 com m on, t i e r 1 cap i ta l ,

to ta l cap i ta l , and t i e r 1 l eve rage ra t i os - ove r the s t ress scenar io ho r i zon . The sect i on t hen descr ibes th e

pro jec t i ons o f l osses on l oans, secur i t i es, and t rad ing , p r i va t e equ i t y , and de r i va t i ves exposures, bo t h i n

th e aggrega te and fo r i nd i v idua l BHCs. Th e f i na l pa r t o f th e sect i on th en repo r ts p ro jec t i ons o f p re -

p r o v i s io n n e t r e ve n u e a n d n et i n co me .

These resu l t s are p resen t ed bo th i n th e aggrega te fo r t he 19 BHCs and fo r i nd i v idu a l BHCs. The

aggrega te resu l t s p rov id e a sense o f the s t r i ngen cy o f th e s t ress scenar io p ro jec t i ons and th e sens i t i v i t y

o f these BHCs as a g rou p to adv erse econo m ic cond i t i ons assum ed in the Superv i so ry St ress Scenar io .

The r ange o f resu l t s across i nd i v idua l BHCs re f l ec ts d i f fe ren ces i n bus iness focu s, asse t com posi t i o n ,

reven ue and exp ense sources, as w e l l as d i f fe r ences i n po r t fo l i o r i sk characte r i s t i cs, l ead ing to

d i f f e r e n ce s in o ve r a ll p e r f o r m a n ce u n d e r t h e h yp o t h e t i cal a d ve r se e co n o m i c sce n a r io . In ad d i t i o n , t h e

st ressed cap i ta l ra t i o p r o jec t i on s re f l ec t d i f fe r ences i n p lanned cap i ta l ac t i ons across th e BHCs. The

comprehens ive resu l t s fo r i nd i v idua l BHCs a re repor ted i n Append ix C.

V.A Stressed Regulatory Capital Ratios

The s t ress scenar io p ro jec t i on s suggest s ign i f i can t dec l i nes i n regu la to r y cap i ta l ra t i os fo r near l y

a l l t h e BHCs under t he assum pt ions o f the Superv i so ry St ress Scenar io and t he Federa l Reserve 's



conserva t ive assumpt ions, includ ing th ose abou t p lanned cap ita l act ions. Overa l l, th e to ta l amo un t o f

t ie r 1 com m on cap i ta l he ld by th e 19 BHCs is es t ima t ed to fa l l by mo re than $300 b i l li on , o r abou t 40

percent, f rom Q3 2011 to year-end 2013 under the Supervisory Stress Scenario and includ ing a l l p lanned

cap i ta l act ions over t h is pe r iod . As show n in Tab le 1 , th e w e igh ted average va lues o f al l fou r regu la to ry

capi ta l ra t ios decl ine over the course of the stress scenario horizon, wi th year-end 2013 leve ls ranging

f ro m 2 .7 pe rcen tage po in t s to 4 .5 pe rcen tage po in ts lower th an a t th e s ta r t o f th e st ress scenar io

hor izon . The th ree ra t ios based on r i sk we igh ted assets ( the t ie r 1 com m on r a t io , t ie r 1 rat io , and to ta l

cap i ta l ra t io ) decl ine m ore on average th an the t ie r 1 leve rage ra t io . Tab le 2 p resen ts th ese ra t ios fo r

each of 19 BHCs.

T ab le 3 sh o w s tw o e s t im a te s o f t h e m in im u m t i e r 1 co m m o n e q u i t y ra t i o d u r i n g th e Su p e rv i so ry

St ress Scenar io fo r each o f th e 19 BHCs. The le f t co lumn shows the m in imu m ra t io assuming no cap i ta l

ac t ions a f te r Q1 2012. The r igh t co lum n shows the min im um ra t ios w i th a l l p rop osed cap i ta l th rou gh Q42013, as in th e subm it t ed capi t a l p lan that is be ing evaluat ed by th e Federa l Reserve in CCAR 2012.

No te tha t t hese m in imu m ra t ios may occur in d i f fe ren t quar t e rs across th e BHCs and in d i f fe ren t

quar t e rs fo r a pa r t i cu lar BHC across th e tw o co lum ns, so one canno t make accura te in fe rences abou t t he

size o r t im ing o f the ne t cap i ta l ac t ions by com par ing these co lum ns.



C o m p r e h e n s i v e C a p i t a l A n a l y s i s a n d R e v i e w 2 0 1 2

T ab le 1 : F ede r a l Res e r v e Es t im a tes in t he Super v is o r y S t r es s Sc enar io

19 Part ic ipa t ing Bank Ho ld ing Compan ies

These projection s represent hypoth etical estimat es that involve an economic outcom e that is mor e adverse than expected. These

estimat es are not forecasts of expected losses, revenues, n et income b efore taxes or capital rat ios. The tw o minim um capital ratio s

p resented be low are fo r the period Q4 2011 th rough Q4 2013 and do not necessari ly occur in the same quarte r.

Th e Fe d e ra l Re se rv e m a d e c h a n g e s t o t h i s t a b le o n Ma rc h 1 6 , 2 0 1 2 , t o c o r re c t c o m p u t a t i o n e r ro rs f o r s o m e l o s s ra t e s a n d l e v e l s .

Th e c o r re c t i o n s d o n o t imp a c t o t h e r f i g u re s , i n c l u d in g c a p i t a l ra t i o s .

P r o j e c t e d C ap i t a l R a t i o s t h r o u g h Q 4 2 0 1 3

U n d e r t h e H y p o t h e t i c a l S u p e r v i s o r y S t r e s s Sc e n a r i o

A c t u a l

Q 3 2 0 1 1

S t re s s e d ra t ios w i t h all

p r o p o s e d cap ita l act ions

t h r o u g hQ4 2013

Q 4 2 0 1 3

Stressed ra t ios w ith a l l

p roposed cap ita l act ions

through Q4 2013

M i n i m u m

S t re s s e d ra t i o s a s s u min g n o

c a p i t a l a c t i o n s

a f t e r Q 1 2 0 1 2 [see f o o t n o t e ] ( 1 )

M i n i m u m

T ie r 1 Co m m o n Ca p i t a l Ra t i o (% ) 1 0 . 1 6 . 3 6 . 2 6 . 8

T ie r 1 Ca p i t a l Ra t i o (% ) 1 2 . 3 7 . 8 7 . 6 8 . 4

To t a l R i s k -B a s e d Ca p i t a l Ra t i o (% ) 1 5 . 5 1 1 . 2 1 1 . 0 1 1 . 7

T ie r 1 L e v e ra g e Ra t i o (% ) 7 . 4 4 . 7 4 . 6 5 . 1

T ie r 1 Co m m o n Ca p i t a l ($ B ) 7 4 1 4 3 8

none none

T ie r 1 Ca p i t a l ($ B ) 9 0 7 5 4 0none none

To t a l R i s k -B a s e d Ca p i t a l ($ B ) 1 , 1 3 9 7 7 0none none

Ris k -W e ig h t e d A s s e t s ($ B ) 7 , 3 5 6 6 , 9 0 4none none

A v e ra g e To t a l A s s e t s ($ B ) 1 2 , 1 8 8 1 1 , 4 8 2none none

P r o j e c t e d L o s s e s, R e v e n u e a n d N e t I n c o m e b e f o r e T a x e s f o r Q 4 2 0 1 1 t h r o u g h Q 4 2 0 1 3

U n d e r t h e H y p o t h e t i c a l S u p e r v i s o r y S t r e s s S ce n a r i o

Bil l ions o f

Do l l a rs

P e rc e n t o f

A v e r a g e A s s e t s

P re -P ro v i s i o n Ne t Re v e n u e[see f o o t n o t e ] ( 2 ) 29 4 2. 5

O t h e r R e v e n u e[see f o o t n o t e ] ( 3 ) 2

less

P r o v i s i o n s 32 4

less Re a l i z ed L o s s e s / G a in s o n Se c u r i t i e s (A FS / HTM )31

less Tra d in g a n d Co u n t e rp a r t y L o s s e s[see f o o t n o t e ] ( 4 )11 6

less O t h e r L o s s e s / G a in s[see f o o t n o t e ] ( 5 )45

equals

N e t I n c o m e b e f o r e T a x es - 2 2 2 - 1 . 9

Pr o jec ted Loan Los s es by T y pe o f Loans f o r Q 4 2011 t h r ough Q 4 2013

U n d e r t h e H y p o t h e t i c a l S u p e r v i s o r y S t r e s s S ce n a r i o

Bil l ions o f

Do l l a rs

P o r t f o l i o L o s s

Rates (%)

Loan Losses[see f o o t n o t e ] ( 6 ) 34 1 8 . 1

F i rs t L i e n M o r t g a g e s , Do me s t i c 61 7. 3

J u n io r L i e n s an d HE L O Cs , Do m e s t i c 56 1 3 . 2

C o m m e r c i a l a n d I n d u s t r i a l 67 8. 2

Co mme rc ia l Re a l E s t a t e , Do me s t i c 24 5. 2

Cre d i t Ca rd s 92 1 7 . 2

O t h e r C o n s u m e r 26 5. 9

O t h e r L o a n s 16 2. 3

[ f o o t n o t e] (1 ) A s s u m e s p la n n e d c a p i t a l a c t i o n s t h r o u g h Q 1 2 0 1 2 , b u t a s s u m in g n o ma t e r i a l c a p i t a l i s s u a n c e s f ro m M a rc h 1 6 t h r o u g h M a r

2 0 1 2 .[endof f o o t n o t e1.]

[ f o o t n o t e] (2 ) P re -P ro v i s i o n Ne t Re v e n u e i n c lu d e s l o s s e s f ro m o p e ra t i o n a l r i s k e v e n t s , mo r t g a g e p u t -b a c k e x p e n s e s , a n d O RE O c o s t s .[endo

[ f o o t n o t e] (3 ) O t h e r Re v e n u e i n c lu d e s o n e t im e i n c o m e a n d (e x p e n s e ) i t e ms n o t i n c l u d e d i n P re -P ro v i s i o n Ne t Re v e n u e . [endof foo tno te 3.]

[ f o o t n o t e] (4 ) T ra d in g a n d Co u n t e rp a r t y i n c l u d e s ma r k - t o -ma r k e t l o s s e s , c h a n g e s i n c re d i t v a lu a t i o n a d ju s t me n t s (CV A ) a n d i n c re m e n t a l d

[ f o o t n o t e] (5 ) O t h e r L o s s e s / G a in s i n c lu d e s p ro je c t e d c h a n g e i n f a i r v a lu e o f l o a n s h e ld f o r s a le a n d l o a n s h e ld f o r i n v e s t m e n t me a s u re d u n

f a i r v a l u e o p t i o n , an d g o o d w i l l i m p a i r m e n t c h a r g e s .[endof foo tno te 5.]

[ f o o t n o t e] (6 ) Co mm e rc ia l a n d i n d u s t r i a l l o a n s i n c lu d e s ma l l a n d me d iu m e n t e r p r i s e l o a n s a n d c o rp o ra t e c a rd s . O t h e r l o a n s i n c lu d e i n t e r

re a l e s t a t e l o a n s . A v e ra g e l o a n b a la n c e s u s e d t o c a l c u la t e p o r t f o l i o l o s s ra t e s e x c lu d e l o a n s h e ld f o r s a le a n d l o a n s h e ld f o r i n v e s t me n t

u n d e r t h e f a i r v a l u e o p t i o n . [endof foo tno te 6.]

N o t e s : Th e t w o m i n i m u m c a p i t a l r at i o s p r e s e n t e d h e r e a r e f o r t h e p e r i o d Q 4 2 0 1 1 t h r o u g h Q 4 2 0 1 3 a n d d o n o t n e c e s s a r i ly o c c u r i n t h e

s a m e q u a r t e r . C a p i t al a ct i o n s i n c l u d e co m m o n d i v i d e n d s , c o m m o n s h a r e r e p u r c h a s e s , a n d c o m m o n s h a r e i s su a n c e . A v e r a g e b a l a n c es

u s e d f o r p ro f i t a b l i t y r a t i o s a n d p o r t f o l i o l o s s ra t e s a re a v e ra g e s o v e r t h e n in e -q u a r t e r p e r i o d . E s t ima t e s ma y n o t s u m p re c i s e l y d u e t o

ro u n d in g . A g g re g a t e ra t i o s a re we i g h t e d a v e ra g e s .

S o u rc e : Fe d e ra l Re s e rv e e st im a t e s i n t h e Su p e r v i s o r y S t re s s s c e n a r i o .




T a b l e 2 : P r o j e c t e d C a p i t a l R a t i o s f o r 1 9 P a r t i c i p a t i n g B a n k H o l d i n g C o m p a n i e s i n t h e S u p e r v i s o r y S t r e s s S c e n a r i o

These projections represent hypo thetical estimates that involve an economic outcome that is more adverse than expected. These estimat es are not forecasts of expected losses, revenues, net income before taxes or capital ratios.

Th e two min imu m c a p i ta l r a t i o s p re s e n te d b e lo w a re fo r t h e p e r io d Q4 2 0 1 1 th ro u g h Q4 2 0 1 3 a n d d o n o t n e ce s sa r i l y o c c u r i n th e s a me q u a r te r .

Q3 2011 rat io type

A l l y F i n a n c i a l

Inc .

Am er ican Express

C o m p a n y

Bank o f Am er ica

C o r p o r a t i o n

T h e B a n k o f

N e w Y o r k

M e l l o n


B B & T


C a p i t a l O n e

F i n a n c i a l

C o r p o r a t i o n C i t i g r o u p I n c

F i f t h T h i r d

. B a n c o r p

Th e G o l d m a n

SachsGroup ,Inc .

J P M o r g a n

C h a s e & C o . K e y c o r p M e t L i f e , I n c .

M o r g a n

S t a n l e y

T h e P N C

F i n a n c i a l

S e r v i c e s

G r o u p , I n c .

R e g i o n s

F i n a n c i a l


S t a t e S t r e e t


S u n T r u s t

Banks , Inc . U . S . B a n c o r p

W e l l s F a r g o &

C o m p a n y

19

P a r t i c i p

B a n k H o

C o m p a

T i e r 1 C o m m o n C a p i t a l R a t i o ( % )8 .0 12 .3 8 .7 12 .5 9 .8 10 .0 11 .7 9 .3 12 .1 9 .9 11 .3 9 .3 12 .0 10 .5 8 .2 16 .0 9 .3 8 .5 9 .3 10 .1

T ie r 1 Cap i t a l Ra t io (% ) 14 .3 12 .3 11 .5 14 .0 12 .6 12 .4 13 .4 12 .0 13 .8 12 .1 13 .5 9 .9 15 .2 13 .1 12 .8 17 .9 11 .1 10 .8 11 .3 12 .3

To ta l R isk -Based Cap i ta l Ra t io (% ) 15 .5 14 .3 15 .9 16 .1 16 .1 15 .4 16 .9 16 .2 16 .9 15 .3 17 .0 10 .2 16 .4 16 .5 16 .5 19 .5 13 .9 13 .5 14 .9 15 .5

T ie r 1 Leve r age Ra t io (% ) 11 .6 9 .8 7 .1 5 .1 9 .2 9 .9 7 .0 11 .1 6 .7 6 .8 11 .9 5 .4 6 .4 11 .4 9 .7 7 .8 8 .9 9 .0 9 .0 7 .4

Q 4 2013 U nde r the H ypo the t i ca lSupervisory Stress Scenario -Stressed ratios with all proposedcapital actions through Q4 2013 Rato type Ally FinancialInc. American ExpressC ompanyB ank o f A mer icaCorporation The Bank ofN ew Y o rkMe l lonC orpo ra t ion BB&TCorporatio n Capital One Financial

C o rpo ra t ion

Citigroup Inc Fifth Third. Bancorp The Goldman

Sachs Group, Inc.

JPMorganChase & Co.

T ie r 1 Com m o n Cap i ta l Ra t io (% ) 4 .4 10 .8 6 .2 13 .1 6 .4 8 .8 4 .9 6 .3 7 .2 5 .9 5 .3 6 .3 7 .6 5 .9 6 .8 12 .5 4 .8 5 .4 6 .3 6 .3



T ie r 1 Leve rage Ra t io (% ) 5 .2 9 .2 5 .3 5 .1 4 .7 6 .9 2 .9 6 .8 4 .5 4 .0 5 .8 4 .1 4 .5 5 .9 6 .4 6 .3 4 .5 5 .6 6 .0 4 .7

Cap i ta l Rat ios Underetical Supervisorynario - Stressed ratiosoposed cap i ta l ac t ions4 2013

ra t io type Ally FinancialInc. American ExpressC ompany B ank o f A mer icaC orpo ra t ionThe Bank ofNew YorkM e l lonCorporation BB&TCorpora t ion Capital One FinancialCorpora t ion Citigroup Inc

Fifth Third. Bancorp The Goldman

Sachs Group, Inc.

JPMorganChase & Co.





Cap i ta l Rat ios Underhetical Supervisoryenario - Stressed ratiosno capital actions012 [see foo tno te ] (1 ) ra t io typeAlly FinancialInc. American ExpressC ompany B ank o f A mer icaC orpo ra t ionThe Bank ofNew YorkM e l lonCorporation BB&TCorpora t ion Capital One FinancialCorpora t ion Citigroup Inc

Fifth Third. Bancorp The Goldman

Sachs Group, Inc.

JPMorganChase & Co. K eyco rp





[ f o o t no t e ] ( 1) A s s u m e s p l a n n e d c a p i t a l a c t i o n s t h r o u g h Q 1 2 0 1 2 , b u t a s s u m i n g n o m a t e r i a l c a p i t a l i s s u a n c e s f r o m M a r c h 1 6 t h r o u g h M a r c h 3 1 , 2 0 1 2 .[endof foo tno te1.]

N o t e s : T h e t w o m i n i m u m c a p i t a l r a t i o s p r e s e n t e d h e r e a r e f o r t h e p e r i o d Q 4 2 0 1 1 t h r o u g h Q 4 2 0 1 3 a n d d o n o t n e c e s s a r i l y o c c u r i n t h e s a m e q u a r t e r . C a p i t a l a c t i o n s i n c l u d e c o m m o n d i v i d e n d s , c o m m o n s h a r e r e p u r c h a s e s , a n d c o m m o n s h a r e i s s u a n c e . E s t i m a t e s m a y n o t s u m p r e c i s e l y d u e t o r o u n d i n g .

S o u r c e : F e d e r a l R e s e r v e e s t i m a t e s i n t h e S u p e r v i s o r y S t r e s s s c e n a r i o .



Comprehensive Capi ta l Ana lysis and Review 2012

Table 3 : Est im ates o f M in im um Tie r 1 Comm on Rat ios, Q4 2011 th rou gh Q4 2013

The m i n i m um s t res s ed ra t i os (% ) a re t he l ow es t qua r t e r l y ra t i os f rom Q 4 2011 t o Q 4 2013 i n t he S upe rv i s o ry

St res s sc ena r i o . The l e f t c o l um n s how s m i n i mu m ra t i os as sum i ng no c ap i t a l act i ons a f t e r Q 1 2012. The r i gh t

c o l um n show s m i n i m um ra t i os w i t h a l l p ro pos ed c ap i t a l act i ons t h r ough Q 4 2013 . M i n i mu m ra t i os may oc c u r

i n d i f f e ren t qua r t e rs acros s t he B HCs , and i n d i f f e ren t qua r t e rs f o r eac h B HC ac ross t he tw o c o l umn s .

B ank Ho l d i ng Company

M i n i m u m s t r e s s e d r a t io s

assuming no cap i ta l ac t ions

a f t e r Q 1 2012[seefoo tno te ] (1 )

M i n i m u m s t r e s s e d r a t io s

w i t h a l l p ropos ed c ap i t a l

ac t i ons t h rou gh Q 4 2013

Al ly Financial Inc. 2.5 2.5

Am er i can Express Comp any 12.4 10.8

B ank o f A me r i c a Co rpo ra t i o n 5 .7 5 .9

The B ank o f New Yo rk M e l l on Co rpo ra t i on 13 .3 13 .0

B B& T Co rpo ra t i o n 7 .3 6 .4

Capi ta l One Financ ia l Corpo rat ion 7 .2 7 .8

Ci t ig rou p Inc . 5 .9 4 .9

Fi f th Th i rd Bancorp 7 .7 6 .3

The Goldm an Sachs Group , Inc . 5 .8 5 .7

JPM or gan Chase & Co. 6 .3 5 .4

Keycor p 6 .3 5 .3

M etL i fe , Inc . 5 .4 5 .1

M organ Stan ley 5 .4 5 .4

The PNC Financial Services Group, Inc. 6 . 6 5. 9

Regions Financ ia l Corpo rat ion 5 .7 6 . 6

Stat e St r eet Corpo rat ion 15.1 12.5

SunTru st Banks, Inc. 5.5 4.8

U.S. Bancor p 7.7 5.4

W e l l s Fa rgo & Company 6 . 6 6 . 0

[ footnot e ] (1) Assum es p lan ned cap i ta l ac t ions th rou gh Q1 2012, but no mat er ia

M arch 31, 2012.[endof f oo tno te1. ]

No t es : Cap i t a l ac t i ons i nc l ude c om mo n d i v i den ds , c omm on s ha re repu rc has es, and com mo n s ha re i s suanc e .

Source: Federa l Reserve es t imates in the Superv isory St ress scenar io .



The changes in stressed regulat ory capi ta l ra t ios vary con siderably across BHCs (see Figures 7

and 8). Overa l l , stressed regulatory capi ta l ra t ios includ ing a l l p lanned capi ta l act ions decl ined over the

course of the stress scenario horizon for a l l but one of the BHCs.

Despi te sometimes sign i f icant pro jected decreases, most o f the BHCs mainta in stressed

regu la to ry cap i ta l ra t ios includ ing al l p lanned cap i ta l d ist r ibu t ions above regu lato r y m in imu m leve ls over

the course of the stress scenario horizon.

[ fo tnote ] 24 T h e m in im u m l e ve l s f o r BHCs t o b e co n s id e r e d a d e q u a t e l y ca p i t a l i ze d a r e 4 p e r ce n t f o r t h e t i e r 1 r a t i o , 8 p e r ce

f o r t h e t o t a l ca p i t a l r a t i o , a n d 3 o r 4 p e r ce n t f o r t h e t i e r 1 l e ve r a g e r a t i o . Ba se d o n t h e U . S. ca p i t a l a d e q u a cy

g u id e l i n e s , t h e t i e r 1 l e ve r a g e m in im u m i s 3 p e r ce n t f o r BHCs w i t h a co m p o s i t e RF I r a t i n g o f " 1 " a n d f o r BHCs t h a t

h a ve im p le m e n t e d t h e Bo a r d ' s r i s k - b a se d ca p i t a l m e a su r e f o r m a r ke t r i s k . T h e t i e r 1 l e ve r a g e m in im u m i s 4

p e r ce n t f o r a l l o t h e r BHCs . T h e t i e r 1 l e ve r a g e r a t i o m in im u m i s 4 p e r ce n t f o r A l l y Fi n a n c ia l I n c. , Am e r i ca n Exp r e ss

Co m p a n y , Ca p i t a l On e F in a n c ial Co r p o r a t i o n , a n d M e t L i f e , In c ., a n d 3 p e r ce n t f o r t h e r e st o f t h e 1 9 BHCs

p a r t i c i p a t i n g i n CCAR 2 0 1 2 . T h e cap i t a l p l a n s r u l e f u r t h e r s t i p u l a t e s t h a t t h e BHCs m u s t d e m o n s t r a t e t h e i r a b i l i t y

t o m a i n t a i n t i e r 1 c o m m o n r a t i o s a b o v e 5 p e r ce n t .[endof f o o t n o t e24.]

Overa l l, 4 o f the 19 BHCs have one o r m ore p ro jec ted

regu la to ry cap i ta l ra t ios ( inc lud ing cap i ta l d ist r ibu t ions) tha t fa l l be low regu la to ry m in imu m levels a t

some p o in t ove r t he s t ress scenar io ho r izon , inc lud ing 3 BHCs w i th a s t ressed ra t io o f t ie r 1 com m on

ra t io be low t he 5 pe rcen t benchm ark es tab l i shed in th e cap i ta l p lans ru le . In in te rp r e t ing these r esu l ts ,

i t is important to recal l that the Federa l Reserve 's stress scenario pro ject ions are de l iberate ly str ingent

and conserva t ive assessment s under hypo t he t ica l , adverse econom ic cond i t ions and the resu l ts a re no t

fo r ecasts o r the m ost l i ke ly ou t com es fo r t hese BHCs.

The stressed capi ta l ra t ios incorporate pro jected leve ls o f to ta l average assets and r isk-weighted

assets over the stress scenario horizon, based on pro ject ions provided by the BHCs in the ir capi ta l p lans.

Pro jected r i sk-we igh ted asse ts fa ll by abou t $450 b i l li on , o r 6 .1 pe rcen t , f rom th e beg inn ing to t he end

of th e str ess scenario hor izon (see Table 1). The Federa l Reserve 's p ro ject ions of losses and PPNR ref lect

th e p ro jec ted g ro w th o r sh r inkage o f r i sk-w e igh ted asse ts fo r each BHC. Th is m eans th a t p ro jec ted

changes in r i sk-w e igh ted assets and to t a l assets do no t a lways have a s t ra igh t fo r w ard imp act on

pro jec ted s t ressed cap i ta l r a t ios .



Figure 7 : M in im um T ie r 1 Com m on Rat io in th e Supe rv iso ry S t ress Scenar io (%)

[For the accessible version of this figure, please see the accompanying HTML]

Fig u r e 8: Ch a n g e f r o m 3 Q1 1 t o M in im u m T ie r 1 Co m m o n Ra t i o

in th e Sup erv iso r y St ress Scenar io (%)

[For the accessible version of this figure, please see the accompanying HTML]



V.B Projected Losses

The Federa l Reserve 's s t ress scenar io p ro jec t i o ns suggest t ha t t he 19 BHCs as a grou p w ou ld

exper ien ce s ign i f i can t l osses under t he assum pt ions o f the Superv i so ry S t ress Scenar io . The s t ress

scenar io resu l t s i nc lude $534 b i l l ion i n p ro jec ted l osses fo r t he 19 BHCs in th e aggrega te o ver th e n in e

quar t e rs o f the s t ress scenar io ho r i zon . These losses i nc lude $3 41 b i l l i on i n accrua l l oan po r t f o l i o l osses,

$31 b i l l i on i n OTTI and o t he r rea l i zed secur i t i es l osses, $116 b i l l ion i n t r ad ing and coun te r pa r t y l osses at

th e s ix BHCs w i th l a rge t r ad ing po r t f o l i os , and $45 b i l l i on i n add i t i ona l l osses f ro m i tem s such as l oans

measured under the fa i r va lue op t i on ( l osses on these loans were ca l cu la ted based on the g loba l

f i n a n c i al m a r ke t sh o ck , co n s i st e n t w i t h t h e t r e a t m e n t o f f ai r va lu e d p o s it i o n s i n t h e t r a d i n g p o r t f o l i o )

and goodw i l l imp a i rm en t charges. Tab le 1 p resen ts th ese resu l t s i n th e aggrega te , w h i l e Tab le 4

p resen t s th em ind i v idua l l y fo r each o f the 19 BHCs.

The b iggest sources o f l oss a re l osses on th e accrua l l oan po r t fo l i os and t r ad ing andco u n t e r p a r t y l o sse s f r o m t h e g l o b a l f i n a n c i al m a r ke t sh o ck . T o g e t h e r , t h e se t w o a cco u n t f o r m o r e t h a n

85 per cen t o f th e $534 b i l li on i n p ro jec ted l osses fo r t he 19 BHCs under th e Super v i so ry S t ress Scenar io .




T a b l e 4 : P r o j e c t i o n s f o r 1 9 P a r t i ci p a t i n g B a n k H o l d i n g C o m p a n i e s

Bi l l ions of Dol lars

These projections represent hypot hetical estimat es that involve an economic outcom e that is more adverse than expected. These estimates a re not forecasts of expected losses, revenues, net income before taxes or capital ratios.

The Federa l Reserve m ade changes to th is tab le on M arch 16 , 2012 , to co r rec t com p u ta t i on e r ro rs fo r som e loss ra tes and leve ls . The co r rec t ion s do no t im pac t o the r f igu res , inc lud i ng cap i ta l ra t ios .

Projected Losses, Revenue andN e t Income be fo re Taxes fo r Q 42011 th rough Q 4 2013 U nde rthe Hypothetical SupervisoryStress Scenario

Type

A l ly F inanc ia l

Inc .

A m e r i c a n

C o m p a n y

B a n k o f

A m e r i c a


The Bank o f

N e w Y o r k

M e l l o n


BB&T


Cap i ta l One

F inanc ia l

C o r p o r a t i o n C i t i g r o u p I nc .

F i f th Th i rd

B a n c o r p

The

G o l d m a n

Sachs Group ,

Inc .

J P M o r g a n

Chase & Co . Keyco rp M e t L i fe , Inc .

M o r g a n

S tan ley

The PNC

F inanc ia l

Se rv ices

Group , Inc .

R e g i o n s

F inanc ia l


S ta te S t ree t


SunTrus t

Banks , Inc . U .S . Bancorp

W e l ls Fa rgo

& C o m p a n y

19

P a r t i c i p a t i n g

B a n k H o l d i n g

C o m p a n i e s

Pre -P rov is ion Ne t Revenue[see f o o t n o t e ] ( 1 ) -5 .1 16 .0 40 .1 6 .5 5 .4 18 .6 41 .2 4 .1 14 .2 59 .3 1 .7 9 .6 1 .0 4 .2 3 .7 2 .4 2 .7 14 .7 53 .3 293 .5

O the r Revenue[see f o o t n o t e ] ( 2 ) 0 .2 0 .0 4 .0 0 .1 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 -1 .8 -0 .4 -0 .3 0 .0 0 .0 0 .3 -0 .1 1 .9

less P rov is ions 3 .1 9 .6 59 .7 1 .1 6 .0 22 .3 61 .6 4 .8 0 .5 48 .9 4 .0 1 .0 0 .9 11 .1 5 .6 0 .4 8 .5 15 .2 60 .2 324 .4

less Rea l i zed Losses /Ga ins on Secur i t ies (AFS /HTM )0 .9 0 .0 1 .2 0 .3 0 .2 0 .3 6 .1 0 .1 0 .2 3 .8 0 .0 11 .5 0 .0 1 .2 0 .0 0 .4 0 .0 0 .7 3 .9 31 .0

less T rad in g and Coun te r pa r ty Losses[see foo tno te ] (3 )0 .0 0 .0 21 .1 0 .0 0 .0 0 .0 20 .9 0 .0 27 .1 27 .7 0 .0 0 .0 12 .8 0 .0 0 .0 0 .0 0 .0 0 .0 6 .9 11 6 .5

less O the r Losses /Ga ins [seefoo tno te ] (4 )0 .9 0 .0 13 .4 0 .0 0 .0 0 .0 2 .9 0 .0 8 .0 1 .7 0 .6 7 .9 8 .1 0 .3 0 .1 0 .0 -0 .1 0 .0 1 .7 45 .5

equals

Net Incom e be fo re Taxes -9 .8 6 .3 -51 .3 5 .1 -0 .9 -4 .0 -50 .3 -0 .9 -21 .5 -22 .9 -2 .9 -10 .8 -22 .5 -8 .9 -2 .4 1 .5 -5 .7 -0 .9 -19 .6 -222.0

an Losses by Type of2011 through Q4he Hypo the t i ca lStress ScenarioTypeAlly Financial Inc. A mer ican C ompanyBank of AmericaCorpo ra t ion The Bank ofN ew Y o rk Me l lonC orpo ra t ion

B B & TC orpo ra t ionCapital One

Financial Corporation

Citigroup Inc. Fifth ThirdBancorp The GoldmanSachs Group, Inc. JPMorganChase & Co.K eyco rp

Loan Losses[seefoo tno te ] (5 ) 3 .6 8 .1 70 .1 1 .2 6 .0 19 .0 67 .0 6 .4 0 .3 55 .8 3 .9 0 .9 0 .7 11 .1 6 .0 0 .3 8 .0 14 .6 58 .3 341 .3

F i rs t L ien M or tgages , Dom es t ic 0 .4 0 .0 17 .7 0 .4 1 .6 1 .3 8 .9 0 .9 0 .0 7 .0 0 .2 0 .0 0 .1 1 .6 1 .3 0 .0 1 .8 2 .0 15 .9 6 1 .1

Jun io r L iens and HELOCs, Dom es t ic 0 .7 0 .0 16 .0 0 .0 0 .6 0 .2 5 .9 1 .1 0 .0 9 .1 0 .7 0 .0 0 .0 3 .0 1 .3 0 .0 2 .2 1 .7 13 .7 56 .3

Com m er c ia l and Indus t r ia l 0 .5 2 .4 12 .3 0 .2 0 .9 1 .3 11 .8 2 .2 0 .0 11 .4 1 .6 0 .0 0 .3 3 .4 1 .0 0 .0 2 .3 4 .2 11 .0 66 .7

Com m er c ia l Rea l Es ta te , Dom e s t ic 0 .1 0 .0 3 .9 0 .1 1 .8 0 .4 0 .5 1 .4 0 .0 1 .8 0 .4 0 .4 0 .0 1 .5 1 .9 0 .1 0 .8 1 .8 6 .7 23 .6

Cred i t Ca rds 0 .0 5 .4 14 .5 0 .0 0 .3 13 .9 27 .0 0 .4 0 .0 21 .3 0 .1 0 .0 0 .0 0 .6 0 .1 0 .0 0 .1 3 .2 5 .0 92 .1

O the r Consum er 2 .0 0 .2 4 .0 0 .0 0 .7 1 .6 8 .1 0 .2 0 .0 2 .1 0 .3 0 .0 0 .1 0 .6 0 .2 0 .0 0 .5 0 .9 4 .2 25 .7

O the r Loans 0 .0 0 .0 1 .8 0 .5 0 .2 0 .2 4 .8 0 .2 0 .3 3 .0 0 .5 0 .5 0 .1 0 .5 0 .3 0 .2 0 .3 0 .8 1 .7 15 .7

s Rates by Type of4 2011 through Q4the Hypo the t i calStress Scenarioe Balances)TypeAlly Financial Inc. A mer ican C ompanyB ank o f A mer icaC orpo ra t ionThe Bank ofNew York M e l lonCorpo ra t ion BB&T Corporation Capital One Financial

C o rpo ra t ion

Citigroup Inc. Fifth ThirdB anco rp The G o ldmanSachs Group, Inc. JPMorganChase & Co.K eyco rp Me tL i fe , Inc

Loan Losses[seefoo tno te ] (5 ) 3 .3 9 .3 8 .3 2 .6 5 .7 11 .4 11 .3 8 .0 0 .9 8 .1 6 .9 1 .4 1 .6 7 .1 8 .1 2 .0 6 .8 7 .4 8 .2 8 .1

F i rs t L ien M or tgages , Dom es t ic 6 .0 0 .0 6 .7 7 .7 5 .4 3 .7 9 .3 7 .7 0 .0 6 .3 7 .5 0 .0 0 .7 9 .0 8 .8 0 .0 7 .4 4 .7 9 .5 7 .3

Jun io r L iens and HELOCs, Dom es t ic 21 .1 0 .0 15 .0 12 .6 8 .5 11 .1 18 .2 12 .1 12 .1 10 .5 7 .8 0 .0 12 .5 11 .5 11 .4 0 .0 12 .6 9 .9 13 .8 13 .2

Com m er c ia l and Indus t r ia l 1 .6 8 .0 7 .7 6 .5 5 .9 8 .2 10 .9 8 .2 0 .0 9 .0 8 .7 0 .0 3 .5 6 .7 6 .2 0 .0 7 .0 10 .8 8 .1 8 .2

Com m er c ia l Rea l Es ta te , Dom e s t ic 2 .3 0 .0 6 .4 9 .8 5 .6 2 .1 5 .9 11 .3 4 .1 3 .0 4 .1 1 .3 4 .0 6 .0 9 .2 20 .1 6 .9 5 .0 5 .5 5 .2

Cred i t Ca rds 0 .0 10 .0 15 .5 0 .0 18 .9 19 .4 18 .5 22 .3 0 .0 18 .0 20 .0 0 .0 0 .0 15 .0 14 .1 0 .0 18 .9 16 .9 22 .4 17 .2

O the r Consum er 3 .0 10 .1 5 .6 1 .2 5 .6 9 .8 23 .4 1 .8 3 .7 3 .6 7 .3 0 .0 1 .2 3 .4 5 .3 0 .0 2 .4 3 .3 5 .1 5 .9

O the r Loans 2 .5 0 .0 1 .9 1 .3 2 .0 3 .5 2 .8 2 .9 0 .9 2 .4 4 .7 1 .6 0 .9 3 .0 3 .2 1 .2 3 .1 4 .7 2 .1 2 .3

es for Q44 2013 Underl Supervisoryssets)Type Ally Financial Inc.A mer ican C ompanyBank of AmericaCorpo ra t ion The Bank ofN ew Y o rk Me l lonC orpo ra t ionBB&T Corporatio n

Capital One FinancialC o rpo ra t ion Citigroup Inc. Fifth ThirdB anco rp The G o ldmanSachs Group, Inc.JPMorganChase & Co. K eyco rp Me tL i fe , Inc

PPN R -2 .7 12 .2 2 .0 2 .0 3 .1 7 .5 2 .3 3 .6 1 .7 2 .7 1 .9 1 .4 0 .1 1 .5 3 .1 1 .2 1 .5 4 .6 4 .1 2 .5

Ne t Incom e be fo re Taxes -5 .2 4 .8 -2 .6 1 .6 -0 .5 -1 .6 -2 .8 -0 .7 -2 .5 -1 .0 -3 .3 -1 .5 -3 .2 -3 .2 -2 .0 0 .8 -3 .3 -0 .3 -1 .5 -1 .9

[ foo tno te ] (1 ) P re -P rov is ion Ne t Revenue inc ludes losses f rom opera t iona l r i sk even ts , m or tgage pu t -back expenses , and OREO cos ts .[endof foo tno te1.]

[ foo tno te ] (2 ) O the r Revenue inc ludes one t im e incom e and (expense) i tem s no t inc luded in P re -P rov is ion Ne t Revenue . [endof foo tno te2.]

[ foo tno te ] (3 ) T rad ing and Coun te r pa r ty inc lud es m ark - to -m ar ke t losses , changes in c red i t va lua t ion ad jus tm en ts (CVA) and inc rem en ta l de fau l t losses .[endof foo tno te3.]

[ foo tno te ] (4 ) O the r Losses /Ga ins inc ludes p ro jec t ed change in fa i r va lue o f loans he ld fo r sa le and loans he ld fo r inves tm en t m easured un der the fa i r va lue op t ion , and goodw i l l im p a i rm en t cha rges .[endof foo tno te4.]

[ foo tno te ] (5 ) Com m er c ia l and indus t r ia l loans inc lude sm a l l and m ed ium en te rp r i se loans and co rpo ra te ca rds . O t he r loans inc lude in te rna t iona l rea l es ta te loans . Ave rage loan ba lances used to ca lcu la te po r t fo l io loss ra tes exc lude loans he ld fo r sa le and loans he ld fo r inves tm en t under the fa i r va lue op t io n . [endof foo tno te5.]

No tes : Ave rage ba lances used fo r p ro f i tab i l i t y ra t ios and po r t fo l io loss ra tes a re ave rages ove r the n ine -quar te r pe r i od . Es t im a tes m ay no t sum p rec ise ly due to round ing .

Source : Federa l Reserve es t im a tes in the Superv iso ry S t ress scenar io .



Loan Losses

Pro jec ted l osses on consumer - re la ted l end ing - domest i c res iden t ia l mor tgages, c red i t ca rds,

and o th e r consum er l oans - rep r esen t 69 pe rcen t o f p ro jec ted l oan losses and 44 pe rcen t o f to t a l

pro jected losses for the 19 BHCs (see Figure 9 and Table 1) . Th is is consistent wi th both the share of

th ese typ es o f loans in the BHCs' loan po r t f o l i os - t hese loans rep resen t 55 pe rcen t o f th e accrua l l oan

por t fo l i o a t th ese f i rm s as o f Q3 2011 - and w i th th e assum pt ions o f the Super v i so ry St ress Scenar io ,

w h ich fea t u res ve ry h igh unem p lo ym ent ra tes and sign i f i can t fu r th e r dec l i nes i n hou s ing p r i ces. Losses

on domest i c res iden t ia l mor tgage loans, i nc lud ing bo th f i r s t l i ens and jun io r l i ens/home equ i t y , a re the

s ingle l a rgest ca tegory , a t $117 b i l l i on , rep resen t ing near l y 35 pe rcen t o f to t a l p ro jec t ed l oan losses.

Pro jec ted l osses on cred i t ca rd l end ing - a t $92 b i l li on - i s th e second la rgest segmen t , rep r esen t ing

m ore than 25 pe rcen t . Pro jec ted l osses on com m erc ia l and indust r i a l l oans, a t $67 b i l l i on , is th e next

l a rgest ca tegory .

Figure 9: Pro jected Losses in th e Sup erv isory St ress Scenari o ($B)[For the accessible version of this figure, please see the accompanying HTML.]

For the 19 BHCs as a g roup , th e n ine -q uar t e r cu m u la t i ve l oss ra te on th e accrua l l oan po r t f o l i o i s

8 .1 pe rcen t , w her e the l oss ra te i s ca l cu la ted as to ta l p r o jec ted l oan losses over th e n ine quar t e rs o f the

st ress scenar io ho r i zon d i v ided by average loan ba lances over th e ho r i zon . Th is ra te i s ve ry h igh by

histo r ica l stan dar ds, mo re sever e t han any U.S. recession since t he 1930 s. As i l lust r a ted in Figure 10,



to ta l loan loss ra tes vary sign i f icant ly across BHCs, ranging between 0.9 and 11.4 percent across these

i n s t i t u t i o n s .

Figure 10: Total Loan Loss Rates in the Supervisory Stress Scenario (%)


The d i f f e rences i n to ta l l oan loss ra tes across th e BHCs re f l ec t d i f fe r ences i n l oan po r t f o l i o

com po si t i on and d i f fe rences i n r i sk characte r i s t i cs fo r each ty pe o f l end ing across th ese f i rm s. Loan

por t fo l i o composi t i on mat te rs because p ro jec ted l oss ra tes va ry s ign i f i can t l y by l oan t ype .

[ foo tnote ] 25 T h e l o a n ca t e g o r i e s a r e d e f i n e d t o b e g e n e r a l l y co n s i s t e n t w i t h ca t e g o r i e s o n t h e F R Y- 9 C r e p o r t s .[endof f o o t n o

Nine-

quar te r cumu la t i ve l oss ra tes range be tween 2 .3 pe rcen t on o the r l oans and 17 .2 pe rcen t on cred i t

ca rds, re f l ec t i ng bo t h d i f fe ren ces in t yp i ca l pe r fo r m ance o f th ese loans - som e loan typ es te nd to

genera t e h igher l osses, th ou gh genera l l y a l so h igher reven ue - and d i f fe ren ces in th e sens i t i v i t y o f

l end ing to th e assum pt ions o f th e Super v i so ry St r ess Scenar io . In pa r t i cu la r , l end ing ca tegor ies w ho se

per fo rmance i s sens i t i ve to unemp loyment ra tes o r hous ing p r i ces may exper ience h igh s t ressed loss

ra tes due to th e cons ide rab le s t r ess assum ed fo r t hese fac to r s i n th e Super v i so ry St r ess Scenar io .

F igu res 11 to 17 p resen t the n ine -quar te r cumu la t i ve l oss ra tes on seven d i f fe ren t ca tegor ies o f

loans for each of the 19 BHCs. There are sign i f icant d i f ferences across BHCs in pro jected loan loss ra tes

fo r s imi la r t ypes o f l oans. Fo r exam p le , wh i l e th e med ian p ro jec t ed l oss ra te on dom est i c f i r s t l i en

res iden t ia l m or t gages is 6 .3 pe rcen t , the r a tes va r ied f ro m a low o f 0 .0 pe rcen t to a h igh o f 9 .5 pe r cen t .



Simi la r l y , fo r commerc ia l and indust r i a l l oans, the range o f p ro jec ted l oss ra tes was f rom 0 .0 to 10 .9

percen t , w i th a m ed ian o f 7 .0 pe rcen t . Pro jec ted l oss ra tes on mo st l oan ca tegor ies show s imi la r

d ispersion across BHCs.

Di f ferences in pro jected loss ra tes across BHCs pr imar i ly re f lect d i f ferences in loan

characte r i s t i cs , such as l oan- to -va lue ra t i o o r deb t se rv i ce coverage ra t i o , and bo r r ow er characte r i s t i cs ,

such as cred i t ra t i ng o r F ICO score . In add i t i o n , som e BHCs have tak en w r i t e -dow ns on po r t fo l i os o f

im pa i red l oans e i the r p u rchased o r acqu i r ed th r ou gh m ergers . Pro jec ted l osses on these loans a re

made us ing the same loss mode ls used fo r o the r l oans o f tha t t ype , and the resu l t i ng l oss p ro jec t i ons a re

th en redu ced by th e am oun t o f such wr i te -d ow ns. Fo r th ese BHCs, p ro jec ted l oss ra tes w i l l be l ower

t h a n f o r B HCs t h a t h o l d s im i l ar l o a n s t h a t h a ve n o t b e e n su b j e ct t o p u r ch a se -r e l a t e d w r i t e - d o w n s .

Figure 11: First Lien M ort gages, Dom estic Loss Rates in th e Supe rvisor y Stress Scenario (%)




Figure 12: Jun ior L iens and HELOCs, Domest ic Loss Rates in Superv isory St ress Scenario (%)


Figure 13: Com m erc ia l and In du str ia l Loss Rates in t he Sup erv isor y Str ess Scenar io (%)[For the accessible version of this figure, please see the accompanying HTML.]



Figu re 14 : Com m erc i a l Rea l Es ta te , Dom es t i c Loss Ra tes in Sup e rv iso r y St r ess Scena r io (%)


Figure 15: Cred i t Card Loss Rates in th e Sup erv isor y St ress Scenar io (%)[For the accessible version of this figure, please see the accompanying HTML.]



Figure 16: Oth er Consum er Loss Rates in the Sup erv isor y St ress Scenar io (%)[For the accessible version of this figure, please see the accompanying HTML.]

Figure 17: Other Loans Loss Rates in the Supervisory Stress Scenario (%)




Losses on Trading, Private Equity, and Derivat ives Posit ions

The s t ress scenar io resu l t s i nc lude $116 b i l l i on i n t r ad ing and coun te r pa r t y c red i t l osses f rom

th e g loba l f i nanc ia l m arke t shock a t the s i x BHCs w i th l a rge t r ad ing , p r i va te equ i t y , and de r i va t i ves

act i v i t y . T rad ing and coun t e rp a r ty c red i t l osses range be tw een $7 b i l l ion and $28 b i l li on across th e si x

BHCs (see Tab le 4 ) , w i t h th e l a rgest l osses at th ose BHCs w i t h th e m ost s ign i f i can t t r ad ing act i v i t i es .

Even so , th e re la t i ve s i ze o f l osses across f i rm s depen ds no t on n om ina l po r t fo l i o s ize, bu t ra the r o n t he

speci f ic r isk charact er ist ics of each BHC's t r ad in g posi t io ns, inclusive of hedges. It is a lso im po rt ant t o

no te tha t p ro jec ted l osses re la ted to the g loba l f i nanc ia l marke t shock a re based on the t rad ing pos i t i ons

he ld by these f i rm s on a s ing le day (genera l l y , Nov em ber 17 , 2011) , and th a t p ro jec t ed l osses cou ld have

d i f fe red , pe rhaps s ign i f i can t l y , based on t rad ing pos i t i ons f rom a d i f fe ren t da te .

So m e p o r t i o n o f t r a d i n g a n d co u n t e r p a r t y c r e d i t l o sse s w e r e d r i ve n b y t h e a sp e c t s o f t h e g l o b a l

f i nanc ia l m arke t shock des igned to cap tu re th e on -go ing si tua t i on i n Europ e . These aspects i nc ludes ign i f i can t assumed hypo the t i ca l i ncreases i n c red i t sp reads on European sovere ign and f i nanc ia l

i ns t i tu t i on ob l i go rs , resu l t i ng i n p r i ce l eve l s tha t wou ld be s ign i f i can t l y be low any observed in the

h is to r i ca l da ta . I t i s d i f f i cu l t to i so la te the im pact o f these aspects o f the g loba l f i nanc ia l mark e t shock

o n t r a d i n g a n d co u n t e r p a r t y l o sses , g i ve n t h e co r r e l a t i o n b e t w e e n t h e se ch a n g e s i n Eu r o p e a n - r e l at e d

r i sk fac to rs and o the r e lements o f the assumed g loba l f i nanc ia l marke t shock, as we l l as the o f ten

comp lex na tu re o f the r i sk exposures and re la ted hedges in these BHCs' t rad ing , p r i va te equ i t y , and

der i va t i ves po r t f o l i os . St i l l , f ocu s ing na r row ly on shocks to Euro pean- re la t ed r i sk fac to rs , th e l a rgest

im pact i s on coun t e rpa r ty c red i t r i sk l osses. D i rec t m ark- t o -m arke t l osses on t r ad ing pos i t i ons re la ted to

these shocks were re la t i ve l y sma l l due to hedg ing o f these pos i t i ons.

V.C Projected PPNR and Net Income

I n th e aggrega te , the 19 BHCs a re p ro jec ted to gener a te $2 94 b i l l i on i n p re -p rov i s ion ne t

revenue cumu la t i ve l y ove r the n ine quar te rs o f the s t ress scenar io ho r i zon , equa l to 2 .5 pe rcen t o f

average assets for these f i rms (see Table 1) . These re la t ive ly severe resul ts re f lect low leve ls o f net

i n te rest i ncome due to the impact o f the Superv i so ry S t ress Scenar io ' s l ow in te rest ra te , f l a t y ie ld cu rve

env i ronment g i ven the BHCs' cu r ren t and p ro jec ted ba lance shee t composi t i on . The resu l t s a l so re f l ec t

l ow leve ls o f non- in te rest i ncome, cons is ten t w i th the fa l l i ng asse t p r i ces and sharp l y con t rac t i ng

econo m ic ac t i v i t y assum ed in th e scenar io . In add i t i on , th e PPNR pro jec t i ons i nco rpo ra te e leva ted

leve ls o f l osses f rom opera t i ona l r i sk even ts such as f raud , emp loyee lawsu i t s , o r compute r sys tem o r

o the r opera t i ng d i s rup t i ons and expenses re la ted to pu t -backs o f mor tgages, ne t ted aga ins t rese rves



already taken by the BHCs.

[ foo tnote ] 26 T h e se e st i m a t e s ar e c o n d i t i o n a l o n t h e h y p o t h e t i c a l a d v e r s e m a c r o e c o n o m i c sc e n a r i o a n d o n c o n s e r v a t i v e

a ssu m p t i o n s . T h e y a r e n o t a su p e r v i so r y e s t im a t e o f t h e cu r r e n t l e g al l ia b i l i t y t h a t BHCs m ig h t a c t u a l l y f a ce .[endo f f o o t n o t e26

PPNR pro jec t ions a lso inco rpo ra te th e increm enta l impact o f the recen t

m or t gage-re la ted se t t lement be tw een severa l o f the CCAR BHCs and s ta te and federa l au t ho r i t ies;

fo r egone in t e rest expenses w ere es t ima t ed fo r o t he r BHCs engaged in mor t gage serv ic ing th a t w ere no t

p a r t o f t h e se t t l e m e n t .

The r at io o f pro jected cum ulat ive PPNR to average assets varies across BHCs (see Figure 18 and

Table 4). A sign i f icant port ion of th is varia t ion ref lects d i f ferences in business focus across the

inst i t u t ions. For instance, the rat io o f PPNR to assets te nd s t o be h igher a t BHCs focu sing on credi t card

lend ing , re f lect ing the h igher ne t in te res t incom e th a t c red i t ca rds genera l l y p roduce re la t i ve to o t he r

fo rms o f lend ing .

[ foo tnote ] 27 As n o t e d , c r e d i t ca r d l e n d in g a l so t e n d s t o g e n e r a t e r e l a t i ve l y h i g h l o ss r a t e s , so t h e h i g h e r PPNR r at e s at t h e

BHCs d o n o t n e ce ssar i l y i n d i ca t e h i g h e r p r o f i t a b i l i t y .[endof f o o t n o t e27.]

The ra t io tend s to be lower a t BHCs act i ve in areas o th e r th an lend ing and d epos i t -

tak ing, such as capi ta l m arket, insurance, and securi t ies processing act iv i t ies. Som e port ion of the

var ia t ion a lso re f lec ts mor e granu la r BHC-spec i f i c fac to rs abou t t he com pos i t ion and na t u re o f th e i r

bus iness act i v i t ies , such as th e sens i t i v i ty o f ce r t a in fo rm s o f fee income o r l i kely vo lum e o f m arke t -w ideact iv i ty u nder t he condi t ions assum ed in t he Super visory Str ess Scenario . Low er PPNR rates do not

necessar i l y im p ly low er ne t income, ho w ever , s ince the same bu siness focus and revenu e r i sk

character ist ics dr iv ing d i f ferences in PPNR across f i rms could a lso resul t in o f fsett ing d i f ferences in

pro jected losses.

Pro jected PPNR and losses are the pr imary dr ivers of pro jected net income. Table 1 presents

aggrega te p r o jec t ions o f the com ponen ts o f p re - tax ne t incom e, inc lud ing p rov isions in to the ALLL and

one- t ime income and expense and ex t rao r d ina ry i tems, under th e Superv iso ry S t ress Scenar io . The top

panel o f Table 4 present s th ese pro ject ions for each of the 19 BHCs. The pro j ect ion s are cum ulat ive for

th e n ine quar te r s o f th e st ress scenar io h o r izon .



Figur e 18: PPNR Rate s in t he Sup erv isor y Str ess Scenar io (%)


Of no te , fo l l ow ing U.S. GAAP, the ne t i ncome p ro jec t i ons i nco rpora te l oan losses i nd i rec t l y

th rough p rov i s ions, wh ich a re ca l cu la ted as p ro jec ted l oan losses p lus any add i t i ona l p rov i s ion o r minus

any ALLL re lease need ed fo r th e ALLL to be at an adequ a te l eve l a t the end o f each quar t e r . The $324

b i l l i on i n to ta l p rov i s ions repo r t ed i n Tab le 1 i s th e resu l t o f $341 b i l li on i n ne t charge-o f f s and $17

bi l l ion in net reserve re leases f rom the ALLL. These re leases occur because, in the aggregate, the leve l

of the ALLL suggested by the Federa l Reserve 's ALLL a lgor i thm is lower at the end of the st ress scenar io

h o r i zo n t h a n a t t h e b e g in n i n g . T h e l o we r l e ve l r e f l e ct s b o t h t h e m o r e p o s i t i ve e co n o m i c e n v i r o n m e n t

fo r 2014 assumed in the Superv i so ry S t ress Scenar io , wh ich genera tes l ower l eve l s o f p ro jec ted fu tu re

ne t charge-o f f s , and th e h igh leve l o f l oan losses p ro jec ted to occur du r ing the n ine -quar t e r ho r i zon ,

w h ich i n pa r t re f l ec ts acce le ra ted reco gn i t i on o f l osses i nheren t i n th e l oan po r t fo l i o .

The Federa l Reserve 's p ro jec t i o ns o f p re - t ax ne t i ncom e und er the Super v i so ry St ress Scenar io

im p ly nega t i ve ne t i ncom e a t m any o f the 19 BHCs ind i v idua l l y , and fo r t he BHCs as a g roup , ove r th e

n ine quar te r s t ress scenar io ho r i zon . As Tab le 1 show s, p ro jec ted ne t i ncom e be fo re taxes ( "p re - tax ne t

i ncom e") i s -$222 b i l l i on over th e s t ress scenar io ho r i zon fo r th e 19 BHCs, equa l to -1 .9 pe rcen t o f

ave rage asse ts fo r th e g rou p .

Figu re 19 i l l ust ra t es th e ra t i o o f p r e - tax ne t i n com e to ave rage asse ts fo r each o f the 19 BHCs.

T h e r a t i o r an g e s b e t w e e n - 5 . 2 p e r ce n t a n d 4 .8 p e r ce n t . Pr o j e c t e d cu mu l a t i ve n e t i n co me f o r m o s t o f



t h e BHCs (16 o f 19 ) is nega t i ve over t he s t ress scenar io h o r i zon . D i f fe rences across th e f i rm s re f l ec t

d i f f e r e n ce s in t h e se n s it i v i t y o f t h e va r i o u s co mp o n e n t s o f n e t i n co m e t o t h e e co n o m i c a n d f i n a n c ia l

m arke t cond i t i on s assum ed in th e Super v i so ry St ress Scenar io . Pro jec ted ne t i ncom e fo r th e si x BHCs

wi th l a rge t rad ing opera t i ons i s a l so a f fec ted by the impact o f the g loba l f i nanc ia l marke t shock on the i r

t rad ing , p r i va te equ i t y , and de r i va t i ves pos i t i ons, i n t roduc ing some add i t i ona l va r ia t i on i n p ro jec ted ne t

i ncom e be t w een th ese si x BHCs and the o t he r f i rm s pa r t i c i pa t i ng i n CCAR 2012 .

Figure 19: Pre-Tax Net Income Rates in the Super visor y Str ess Scenari o (%)




Append ix A

Sup erv isory St ress Scenar io

This App end ix pro v ides a descr ipt ion of th e Super v isory Str ess Scenar io pro v ided by th e Federal Reserve.

I t i s imp ort ant to note t hat the Superv isory St r ess Scenar io i s not a forecast but ra ther a

hyp ot het ical scenario t o be u sed to assess the stren gth and r esil ience of BHC capi tal in a severely

adverse econo m ic envi ro nm ent . The Sup erv isory Str ess Scenario, wh i le unl ikely, represents an

outcome in which the U.S. economy experiences a s igni f icant recession and economic act iv i ty in other

major economies also contracts s igni f icant ly .

The scenar io sta r ts in th e fou r th quar te r o f 2011 and ex tends th rou gh the four th q uar te r o f

2014, wh ich perm its th e calculat ion of loan- loss reserves at t he end of 2013. The scenar io is def in ed

over 25 var iables. For the do m estic U.S. var iables, th e scenar io inc ludes:

• Five m easures of econo m ic act iv i ty and pr ices: Real and nom inal Gross Dom estic Prod uct (GDP), t he

unemployment ra te o f the c iv i l ian non- ins t i tu t iona l popu la t ion aged 16 and over , nomina l

disposable p ersonal incom e, and th e Con sume r Pr ice Index (CPI) ;

• Four aggregate m easures of asset pr ices or f inan cial condi t ions: The CoreLogic National House Pr ice

Index, t he N ation al Coun ci l for Real Estate Investm ent Fiduciar ies Com m ercial Real Estate Pr ice

Index, t he Dow Jone s Total Sto ck M arket Index, and the Chicago Board Opt ions Exchange M arket

Volat i l i ty Index; and,

• Four m easures o f in te rest ra tes : th e ra te on th e th ree-m ont h Treasury b i l l , th e y ie ld on th e 10-year

Treasury bond, the y ie ld on a 10-year BBB corpo ra te secur i ty , and the in te rest ra te assoc ia ted w i th a

conforming, convent iona l , f i xed- ra te , 30-year mor tgage.

For the in te rnat iona l var iab les, th e scenar io inc ludes th ree var iab les in four count r ies/ count ry b locks.

• The th ree var iab les fo r each country / count ry b lock are th e percent change in real GDP, th e percent

change in the Consumer Pr ice Index or local equivalent, and the U.S./ foreign currency exchange

ra te .

• The four count r ies/ count ry b locks inc luded are th e euro area, th e Un i ted Kingdom, deve lop ing Asia ,

and Japan. The euro area is de f ined as th e 17 European Un ion m em ber s ta tes th a t have adopt ed

the euro as their common currency and developing Asia is def ined as the aggregate of China, India,

Hong Kong, and Taiwan.



The preceding d iscussion describes the broad contours of the Supervisory Stress Scenario over

th e per iod f ro m 2012 to 2014 . The spec i f i c va lues fo r a l l th e va r iab les inc luded in th e scenar io a re

shown on the fo l lowing pages.



S uperv isory S t ress S cenar io

OB SRea l GDP

g r o w t h

N o m i n a l

G D P g r o w t h

Rea l

d isposab le

i n c o m e

g r o w t h

N o m i n a l

d isposab le

i n c o m e

g r o w t h

U n e m p l o y

m e n t r a t e

CP I in f la t ion

ra t e

3 - m o n t h

Treasury

y i e l d

1 0 - y e a r

Treasury

y i e l d

BB B

c o r p o r a t e

y i e l d

M or t age

r a t e

D o w J o n e s

Tot a l S t ock

M a r k e t

I n d e x

M a r k e t

V o l a t i l i t y

I ndex (V I X )

House P r ice

I n d e x

C o m m e r c i a l

Rea l E s t a t e

P r ice I ndex

Q 1 2 0 0 1 - 1 .3 1 1 .4 0 3 .0 5 5 .9 6 4 .2 3 3 .8 8 4 .8 2 5 .3 0 7 .4 4 7 .2 4 1 0 ,6 4 5 .8 5 3 2 .8 4 1 1 3 .4 6 1 3 0 .9 8

Q 2 2 0 0 1 2 .6 5 5 .4 7 - 1 .0 8 0 .8 2 4 .4 1 2 .8 6 3 .6 6 5 .5 0 7 .4 9 7 .3 7 1 1 ,4 0 7 .1 5 3 4 .7 2 1 1 5 .2 0 1 3 0 .1 2

Q 3 2 0 0 1 - 1 .1 0 0 .1 5 1 0 .5 8 1 0 .6 6 4 . 8 1 1 .0 8 3 .1 9 5 .2 6 7 .2 6 7 .1 9 9 ,5 6 2 .9 5 4 3 .7 4 1 1 7 .5 8 1 2 9 .2 0

Q 4 2 0 0 1 1 .4 1 2 .6 6 - 4 .5 9 - 4 .3 8 5 .5 3 - 0 .2 5 1 .9 1 5 .0 6 7 .1 9 7 .0 0 1 0 ,7 0 7 . 6 8 3 5 .3 1 1 1 9 .9 9 1 2 7 .3 6

Q 1 2 0 0 2 3 .4 6 4 .9 3 1 1 .2 3 1 2 .2 5 5 .7 0 1 .2 5 1 .7 2 5 .3 9 7 .5 8 7 .2 0 1 0 ,7 7 5 . 7 4 2 6 .0 9 1 2 2 .4 4 1 2 9 .0 5

Q 2 2 0 0 2 2 .1 4 3 .9 9 2 .2 1 5 .4 4 5 .8 4 3 .2 0 1 .7 2 5 .3 5 7 .6 1 7 .0 3 9 ,3 8 4 . 0 3 2 8 .4 2 1 2 5 .7 4 1 2 9 .2 4

Q 3 2 0 0 2 2 .0 4 3 .8 2 - 1 .3 7 0 .6 4 5 .7 2 2 .1 5 1 .6 4 4 .5 5 7 .2 8 6 .4 8 7 ,7 7 3 . 6 3 4 5 .0 8 1 2 9 .1 0 1 3 0 .4 9Q 4 2 0 0 2 0 .1 4 2 .4 6 0 .9 5 2 .8 6 5 .8 4 2 .4 0 1 .3 4 4 .2 9 7 .0 4 6 .2 5 8 ,3 4 3 . 1 9 4 2 .6 4 1 3 1 .5 6 1 3 1 .7 7

Q 1 2 0 0 3 1 .6 8 4 .5 5 1 .4 8 4 .4 3 5 .8 7 4 .1 3 1 .1 6 4 .1 6 6 .4 7 5 .9 9 8 ,0 5 1 .8 6 3 4 .6 9 1 3 4 .5 9 1 3 4 .6 3

Q 2 2 0 0 3 3 .4 3 4 .6 4 6 .1 9 6 .5 0 6 .1 5 - 0 .5 9 1 .0 4 3 .8 0 5 .6 5 5 .6 5 9 ,3 4 2 . 4 2 2 9 .1 3 1 3 7 .4 8 1 3 5 .9 3

Q 3 2 0 0 3 6 .7 5 9 .1 4 5 .7 1 8 .4 7 6 .1 0 2 .9 9 0 .9 3 4 .4 0 6 .0 2 6 .1 8 9 ,6 4 9 . 6 8 2 2 .7 2 1 4 1 .6 8 1 3 7 .1 0

Q 4 2 0 0 3 3 .6 7 5 .8 0 2 .3 2 4 .2 2 5 .8 1 1 .5 7 0 .9 2 4 .4 4 5 .8 4 6 .0 9 1 0 ,7 9 9 .6 3 2 1 .0 7 1 4 6 .3 2 1 3 9 .0 4

Q 1 2 0 0 4 2 .6 6 6 .2 8 1 .7 9 5 .1 9 5 .6 8 3 .4 3 0 .9 2 4 .1 4 5 .4 5 5 .7 5 1 1 ,0 3 9 .4 2 2 1 .5 8 1 5 2 .6 7 1 4 1 .2 2

Q 2 2 0 0 4 2 .6 0 6 .1 1 4 .0 1 7 .1 1 5 .5 8 3 .1 6 1 .0 8 4 .7 5 6 .0 8 6 .3 1 1 1 ,1 3 8 .9 1 1 9 .9 6 1 5 9 .1 0 1 4 3 .5 2

Q 3 2 0 0 4 3 .0 1 6 .0 3 2 .7 0 5 .2 5 5 .4 3 2 .5 8 1 .4 9 4 .4 5 5 .7 7 6 .0 6 1 0 ,8 9 5 . 4 8 1 9 .3 4 1 6 4 .3 3 1 4 6 .5 3

Q 4 2 0 0 4 3 .3 1 6 .4 3 5 .7 1 9 .1 5 5 .3 8 4 .3 9 2 .0 1 4 .3 0 5 .4 4 5 .8 9 1 1 ,9 7 1 . 1 4 1 6 .5 8 1 7 0 .2 5 1 4 7 .6 1

Q 1 2 0 0 5 4 .1 9 8 .0 9 - 4 .7 9 - 2 .5 1 5 .2 7 2 .0 5 2 .5 4 4 .3 9 5 .4 3 5 .9 1 1 1 ,6 3 8 . 2 7 1 4 .6 5 1 8 0 .1 1 1 4 8 .1 2

Q 2 2 0 0 5 1 .7 9 4 .5 5 2 .8 5 5 .4 0 5 .1 0 2 .6 8 2 .8 6 4 .2 4 5 .4 6 5 .8 7 1 1 ,8 7 6 . 7 4 1 7 .7 4 1 8 6 .4 5 1 7 4 .6 4

Q 3 2 0 0 5 3 .2 1 7 .5 2 2 .4 1 7 .1 0 4 .9 5 6 .2 4 3 .3 6 4 .2 9 5 .4 8 5 .9 2 1 2 ,2 8 9 .2 6 1 4 .1 7 1 9 2 .5 1 1 7 5 .7 6

Q 4 2 0 0 5 2 .0 7 5 .5 4 2 .2 1 5 .8 4 4 .9 4 3 .7 2 3 .8 3 4 .6 0 5 .8 8 6 .4 0 1 2 ,5 1 7 .6 9 1 6 .4 7 1 9 7 .0 7 1 8 6 .3 8

Q 1 2 0 0 6 5 .1 5 8 .3 1 7 .7 1 9 .5 2 4 .7 1 2 .1 3 4 .3 9 4 .6 7 5 .9 7 6 .4 2 1 3 ,1 5 5 . 4 4 1 4 .5 6 2 0 1 .8 2 1 9 5 .5 0

Q 2 2 0 0 6 1 .6 3 5 .2 4 3 .6 0 6 .7 0 4 .6 4 3 .6 8 4 .7 1 5 .1 5 6 .4 8 6 .8 0 1 2 ,8 4 9 .2 9 2 3 .8 1 1 9 9 .5 5 1 9 8 .0 0

Q 3 2 0 0 6 0 .0 5 3 .1 1 1 .9 4 4 .9 0 4 .6 3 3 .8 3 4 .9 1 4 .9 6 6 .4 3 6 .7 7 1 3 ,3 4 5 . 9 7 1 8 .6 4 1 9 8 .2 9 1 9 9 .4 3

Q 4 2 0 0 6 2 . 7 5 4 . 5 9 5 . 3 5 5 . 2 6 4 . 4 4 - 1 . 6 9 4 . 9 0 4 . 7 0 6 . 1 2 6 . 4 3 1 4 , 2 5 7 . 5 5 1 2 . 6 7 1 9 8 . 9 3 2 1 5 . 7 6

Q 1 2 0 0 7 0 .5 4 5 .2 3 1 .8 2 5 .8 3 4 .4 9 3 .9 2 4 .9 8 4 .7 6 6 .1 1 6 .4 0 1 4 ,4 0 9 . 2 7 1 9 .6 3 1 9 6 .4 3 2 2 2 .9 1

Q 2 2 0 0 7 3 .6 5 6 .5 0 0 .6 0 4 .0 8 4 .4 7 4 .7 6 4 .7 4 4 .9 2 6 .3 0 6 .5 5 1 5 ,2 1 0 .6 5 1 8 .8 9 1 9 1 .3 5 2 2 9 .8 1

Q 3 2 0 0 7 2 .9 6 4 .3 4 1 .5 9 3 .8 5 4 .6 5 2 .4 4 4 .3 1 4 .8 4 6 .5 4 6 .7 5 1 5 ,3 6 2 .0 2 3 0 .8 3 1 8 5 .7 7 2 2 1 .4 6

Q 4 2 0 0 7 1 .7 0 3 .6 4 2 .2 3 6 .5 2 4 .8 0 4 .9 2 3 .4 0 4 .4 1 6 .3 7 6 .4 1 1 4 ,8 1 9 . 5 8 3 1 .0 9 1 7 9 .9 9 2 2 2 .8 8

Q 1 2 0 0 8 - 1 .7 6 0 .5 8 5 .9 0 1 0 .0 0 4 .9 5 4 .5 1 2 .0 7 3 .8 7 6 .5 4 6 .0 4 1 3 ,3 3 2 .0 1 3 2 .2 4 1 7 3 .0 4 2 2 3 .7 1

Q 2 2 0 0 8 1 .3 2 4 .0 3 8 .2 2 1 3 .1 1 5 .3 1 5 .3 1 1 .6 2 4 .0 9 6 .8 4 6 .2 6 1 3 ,0 7 3 . 5 4 3 1 .0 1 1 6 5 .3 1 2 1 7 .7 9

Q 3 2 0 0 8 - 3 .6 6 - 0 .5 7 - 8 .8 2 - 4 .8 6 6 .0 3 6 .4 6 1 .4 9 4 .0 5 7 .1 9 6 .5 0 1 1 ,8 7 5 .4 1 4 6 .7 2 1 5 8 .2 5 2 1 7 .1 1

Q 4 2 0 0 8 - 8 .8 9 - 8 .4 3 - 0 .2 3 - 5 .7 9 6 .9 1 - 9 .0 7 0 .3 0 3 .7 2 9 .3 9 6 .0 3 9 ,0 8 7 . 1 7 8 0 . 8 6 1 4 9 .5 1 1 8 9 .5 4

Q 1 2 0 0 9 - 6 .6 7 - 5 .2 3 - 3 .8 1 - 5 .4 2 8 .2 2 - 2 .5 0 0 .2 1 3 .2 3 8 .9 6 5 .1 8 8 ,1 1 3 .1 4 5 6 .6 5 1 4 2 .7 7 1 8 6 .9 3

Q 2 2 0 0 9 - 0 .6 9 - 1 .1 4 0 .2 5 2 .1 5 9 .2 9 1 .9 7 0 .1 7 3 .6 5 8 .1 5 5 .1 4 9 ,4 2 4 . 9 2 4 2 .2 8 1 4 3 .5 1 1 5 4 .6 4

Q 3 2 0 0 9 1 .7 0 1 .9 3 - 5 .4 2 - 2 .5 7 9 .6 9 3 .6 7 0 .1 6 3 .8 1 6 .7 6 5 .2 8 1 0 ,9 1 1 .6 9 3 1 .3 0 1 4 4 .8 1 1 5 7 .5 0

Q 4 2 0 0 9 3 .8 0 4 . 8 8 - 0 .5 8 2 .1 8 1 0 .0 1 2 .7 2 0 .0 6 3 .6 9 6 .1 3 5 .0 3 1 1 ,4 9 7 .4 1 3 0 .6 9 1 4 5 .3 4 1 5 2 .2 4

Q 1 2 0 1 0 3 .9 4 5 .5 2 4 .8 6 6 .8 1 9 .7 0 1 .2 8 0 .1 1 3 .8 7 5 .7 8 5 .1 1 1 2 ,1 6 0 . 9 7 2 7 .3 1 1 4 6 .6 6 1 5 7 .5 0

Q 2 2 0 1 0 3 .7 9 5 .4 3 5 .5 7 5 .9 1 9 .6 6 - 0 .5 1 0 .1 5 3 .6 2 5 .5 5 5 .0 2 1 0 ,7 5 0 .0 1 4 5 .7 9 1 4 6 .1 0 1 7 1 .2 7

Q 3 2 0 1 0 2 .5 1 3 .8 6 2 .2 7 3 .2 7 9 .5 9 1 .4 2 0 .1 6 2 .9 0 5 .0 7 4 .5 4 1 1 ,9 4 7 . 1 4 3 2 .8 6 1 4 1 .7 8 1 6 0 .4 5

Q 4 2 0 1 0 2 .3 5 4 .1 6 1 .5 0 3 .4 7 9 .6 3 2 .6 8 0 .1 4 2 .9 7 5 .0 4 4 .5 0 1 3 ,2 9 0 .0 3 2 3 .5 4 1 3 9 .6 1 1 7 8 .9 5

Q 1 2 0 1 1 0 .3 6 3 .0 9 1 .2 4 5 .1 9 8 .9 3 5 .2 5 0 .1 3 3 .5 3 5 .4 0 4 .9 5 1 4 ,0 3 6 .4 3 2 9 .4 0 1 3 7 .9 3 1 7 7 .1 7

Q 2 2 0 1 1 1 .3 4 3 .9 6 0 .5 9 3 .9 1 9 . 0 6 4 .0 2 0 .0 5 3 .2 8 5 .1 5 4 .7 6 1 3 ,9 6 8 .1 1 2 2 .7 3 1 3 7 .5 6 1 7 3 .8 2

Q 3 2 0 1 1 2 .4 6 5 .0 4 - 1 .7 3 0 .5 9 9 . 0 9 3 .0 9 0 .0 2 2 .4 8 4 .8 7 4 .4 0 1 1 ,7 7 1 .8 6 4 8 .0 0 1 3 6 .8 6 1 7 4 .0 8

Q 4 2 0 1 1 - 4 .8 4 - 1 .7 0 - 6 .0 2 - 3 .3 7 9 .6 8 2 .2 1 0 .1 0 2 .0 7 5 .6 5 4 .6 5 9 ,5 0 1 . 4 8 7 5 .8 6 1 3 5 .1 3 1 6 8 .4 0

Q 1 2 0 1 2 - 7 .9 8 - 5 .3 9 - 6 .8 1 - 5 .3 0 1 0 .5 8 1 .7 8 0 .1 0 1 .9 4 6 .8 3 5 .1 2 7 ,5 7 6 . 3 8 9 0 .5 0 1 3 1 .6 1 1 6 1 .0 4

Q 2 2 0 1 2 - 4 .2 3 - 2 .5 4 - 4 .2 9 - 3 .4 6 1 1 .4 0 1 .0 2 0 .1 0 1 .7 6 6 .8 1 5 .1 6 7 ,0 8 9 . 8 7 8 0 .0 0 1 2 7 .5 0 1 5 3 .4 2

Q 3 2 0 1 2 - 3 .5 1 - 2 .2 4 - 3 .1 6 - 2 .4 4 1 2 .1 6 0 .8 9 0 .1 0 1 .6 7 6 .7 5 5 .1 7 5 ,7 0 5 . 5 5 8 1 .2 3 1 2 3 .1 2 1 4 6 .5 3

Q 4 2 0 1 2 0 .0 0 0 .0 9 - 0 .5 7 - 0 .3 6 1 2 .7 6 0 .3 5 0 .1 0 1 .7 6 6 .4 5 5 .0 8 5 ,6 6 8 .3 4 6 9 .8 2 1 1 9 .0 8 1 3 9 .3 6

Q 1 2 0 1 3 0 .7 2 0 .5 8 0 .7 4 0 .8 4 1 3 .0 0 0 .2 3 0 .1 0 1 .7 4 6 .0 7 4 .9 3 6 ,0 8 2 .4 7 6 2 .7 5 1 1 5 .1 5 1 3 6 .7 5

Q 2 2 0 1 3 2 .2 1 2 .0 1 1 .6 6 1 .7 4 1 3 .0 5 0 .2 1 0 .1 0 1 .8 4 5 .8 3 4 .8 2 6 ,3 8 4 .3 2 5 7 .7 6 1 1 1 .9 2 1 3 5 .2 0

Q 3 2 0 1 3 2 .3 2 2 .1 4 2 .6 9 2 .8 8 1 2 .9 6 0 .3 0 0 .1 0 1 .9 8 5 .7 4 4 .7 7 7 ,0 8 4 .6 5 5 3 .8 2 1 0 9 .7 7 1 3 4 .0 2

Q 4 2 0 1 3 3 .4 5 3 .2 6 2 .2 7 2 .4 8 1 2 .7 6 0 .3 2 0 .1 0 1 .9 8 5 .5 1 4 .6 6 7 ,6 1 8 . 8 9 4 9 .8 4 1 0 8 .4 8 1 3 4 .3 6

Q 1 2 0 1 4 3 .3 6 2 .9 4 2 .7 7 2 .6 2 1 2 .6 1 - 0 .0 3 0 .1 0 1 .9 7 5 .2 8 4 .5 4 8 ,0 1 4 . 7 1 4 5 .8 7 1 0 8 .0 8 1 3 4 .4 5

Q 2 2 0 1 4 3 .7 1 3 .1 8 3 .5 3 3 .2 5 1 2 .3 6 - 0 .1 6 0 .1 0 1 .8 8 4 . 9 4 4 . 3 8 9 , 9 2 5 . 7 3 3 4 . 9 6 1 0 8 . 4 0 1 3 5 . 9 1Q 3 2 0 1 4 4 .6 4 4 .0 9 2 .8 2 2 .5 3 1 2 .0 4 - 0 .1 7 0 .1 0 1 .8 6 4 .7 2 4 .2 6 1 0 ,8 7 4 . 3 8 2 4 .2 2 1 0 9 .2 4 1 3 9 .5 3

Q 4 2 0 1 4 4 .6 4 4 .0 0 4 .4 8 4 .0 1 1 1 .6 6 - 0 .3 4 0 .1 0 1 .8 9 4 .5 8 4 .1 7 1 2 ,0 0 5 .1 1 1 7 .5 1 1 1 0 .2 9 1 4 3 .3 5

N o t e s :

S o u r c e s f o r d at a t h r o u g h 2 0 1 1 : Q 3 ( a s re l e a s ed t h r o u g h 1 1 / 0 8 / 2 0 1 1 ) . 2 0 1 1 : Q 3 i n t e r n a t i o n a l G D P d a t a b a s e d o n s t af f c a l c u l a t i o n s .

V a l u e s a f t e r t h a t d a t e e q u a l a s s u m p t i o n s f o r t h e s u p e r v i s o r y s t r e s s s c e n a r i o .

Va r ia b le s r e p o r te d a s g r o wth r a te s a r e e xp r e sse d a s p e r ce n t ch a n g e s a t a n a n n u a l r a te .

Rea l GDP growt h : G r o s s D o m e s t i c P r o d u c t , b i l l i o n s o f c h a i n - w e i g h t e d 2 0 0 5 d o l l a r s , B u r e a u o f E c o n o m i c A n a l y s i s

N o m i n a l G D P g r o w t h : G r o ss Do me st i c Pr o d u ct , b i l l i o n s o f d o l l a r s , Bu r e a u o f Eco n o mic An a lys i s

CP I in f la t ion ra t e : Bu r e a u o f L a b o r S ta t i s t i cs

Rea l D isposab le P ersona l I ncom e growt h : B i l l i on s o f c h a i n - w e i g h t e d 2 0 0 2 d o l l a r s , e q u a ls n o m i n a l d i s p o s a b l e p e r so n a l i n c o m e d i v i d e d b y t h e p r i c e

i n d e x f o r p e r s o n a l c o n s u m p t i o n e x p e n d i t u r e s , B u r e a u o f Ec o n o m i c A n a l y s i s

N o m i n a l D i s p o s a b l e P e r so n a l I n c o m e g r o w t h : Bi l l i o n s o f d o l l a r s , Bu r e a u o f Eco n o mic An a lys i s

U n e m p l o y m e n t R at e : Bu r e a u o f L a b o r S ta t i s t i cs ( q u a r te r l y a ve r a g e o f mo n th l y d a ta )

3 - M o n t h T - B i l l R at e : Q u a r te r l y a ve r a g e o f 3 - mo n th T r e a su r y b i l l se co n d a r y ma r ke t r a te d i sco u n t b a s i s , Fe d e r a l Re se r ve Bo a r d

10-y r Treasury B ond Rat e : Q u a r t e r l y a ve r a g e o f y ie ld o n 1 0 - yr U.S . T r e a su r y b o n d , co n st r u c t e d fo r FRB/US mo d e l b y Fe d e r a l Re se r ve s ta f f

B B B Corpora t e B ond Rat e : Yie ld o n 1 0 - yr BBB- r a te d co r p o r a te b o n d , co n st r u c te d fo r FRB/US mo d e l b y Fe d e r a l Re se r ve s ta f f

M o r t g a g e R at e : F r e d d i e M a c

Dow Jones To t a l St ock M arke t I ndex : En d o f q u a r te r va lu e , Do w Jo n e s

Nat iona l House P r ice I ndex : Co r e L o g ic ( se a so n a l l y a d ju s te d b y Fe d e r a l Re se r ve s ta f f )

CRE Price Index: Co mp o si t e i n d e x cr e a te d b y Fe d e r a l Re se r ve s ta f f u s in g th e o f f i ce , r e ta i l , a n d in d u st r i a l N CREIF T r a n sa ct i o n Ba se d In d e xe s.

V I X : Ch ica g o Bo a r d O p t i o n s Exch a n g e

E uro A rea Rea l GDP Growt h : sta f f ca l cu la t i o n s b a se d o n S ta t i s t i ca l O f f i ce o f th e Eu r o p e a n Co mmu n i t i e s v ia Ha ve r

E u r o A r e a I n f l a t i o n : s t a f f c a l c u l a t i o n s b a s e d o n S t a t i st i c a l O f f i c e o f t h e E u r o p e a n C o m m u n i t y v i a H a v e rD e v e l o p i n g A s i a R e a l G D P G r o w t h : sta f f ca l cu la t i o n s b a se d o n Ba n k o f Ko r e a v ia Ha ve r , Ch in e se Na t io n a l Bu r e a u o f S ta t i s t i cs v ia CEIC,

In d ia n Ce n t r a l S ta t i s t i ca l O r g a n iza t i o n v ia CEIC, Ce n su s a n d S ta t i s t i cs De p a r tme n t o f Ho n g Ko n g v ia CEIC, a n d Ta iwa n Di r e c to r a te -

G e n e r a l o f Bu d g e t , Acco u n t in g a n d S ta t i s t i cs v ia CEIC.

D e v e l o p i n g A s i a I n f l a t i o n : sta f f ca l cu la t i o n s b a se d o n Ba n k o f Ko r e a v ia CEIC, Ch in e se S ta t i s t i ca l In fo r ma t io n a n d Co n su l ta n cy Se r v i ce

v ia CEIC, a n d IMF Re ce n t Eco n o m ic De ve lo p me n ts , L a b o u r Bu r e a u o f In d ia v ia CEIC a n d IMF , Ce n su s a n d S ta t i s t i c D e p a r tm e n t o f H o n g

Ko n g v ia CEIC, Ce n su s a n d Sta t i s t i cs De p a r t me n t o f Ho n g Ko n g v ia CEIC, a n d Ta iwa n Di r e c to r a te - G e n e r a l o f Bu d g e t , Acco u n t i n g a n d

Sta t i s t i cs v ia CEIC.

Japan Rea l GDP Growt h : Ca b in e t O f f i ce v ia Ha ve r

J a p a n I n f l a t i o n : M i n i s t r y o f I n t e r n a l A f f a i r s a n d C o m m u n i c a t i o n s v i a H a v e r

UK Rea l GDP Growt h : O ff i ce o f Na t io n a l S ta t i s t i cs v ia Ha ve r

U K I n f l a t i o n : O ff i ce o f Na t io n a l S ta t i s t i cs ( u se s Re ta i l P r i ce In d e x to e x te n d se r ie s b a ck to 1 9 6 0 ) v ia Ha ve r

E xchange Rat es : B l o o m b e r g



S uperv isory S t ress S cenar io

OB S

E u r o A r e a

Rea l GDP

G r o w t h

E u r o A r e a

I n f l a t i o n

E uro A rea

B i l a t e r a l

D o l l a r

E xchange

Rat e

( $ / E u r o )

D e v e l o p i n g

A s ia Rea l

G D P G r o w t h

D e v e l o p i n g

A s i a

I n f l a t i o n

D e v e l o p i n g

A s ia

B i l a t e r a l

Do l la r

E xchange

Rat e

( F / U S D ,

I ndex , B ase

= 2000 Q1)

Japan Rea l

G D P G r o w t h

Japan

I n f l a t i o n

Japan

B i l a t e r a l

D o l l a r

E xchange

R a t e

( Y e n / U S D )

UK Rea l

G D P G r o w t hU K I n f l a t i o n

UK B i la t e ra l

Do l la r

E xchange

Rat e

( U S D / P o u n d )

Q 1 2 0 0 1 3 .7 0 1 .0 6 0 .8 8 3 .8 2 1 .5 9 1 0 5 .9 0 1 .7 9 0 .5 5 1 2 5 .5 4 5 .3 8 0 . 0 9 1 .4 3

Q 2 2 0 0 1 0 .3 2 4 .0 3 0 .8 5 5 .6 9 1 .9 8 1 0 5 .9 9 - 2 .3 6 - 2 .0 0 1 2 4 .7 3 1 .6 8 3 .0 2 1 .4 1Q 3 2 0 0 1 0 .1 6 1 .4 4 0 .9 1 4 .4 5 1 .2 0 1 0 6 .2 9 - 4 .6 3 - 0 .5 9 1 1 9 .2 3 2 .6 6 1 .0 2 1 .4 7

Q 4 2 0 0 1 0 .5 0 1 .6 9 0 .8 9 6 .5 0 - 0 .2 5 1 0 6 .7 4 - 1 .7 5 - 1 .8 5 1 3 1 .0 4 1 .6 0 0 .0 4 1 .4 5

Q 1 2 0 0 2 0 .9 1 2 .9 7 0 .8 7 7 .1 6 0 .3 2 1 0 7 .2 0 1 .1 9 - 1 .1 1 1 3 2 .7 0 3 .3 1 1 .9 0 1 .4 3

Q 2 2 0 0 2 2 .0 1 2 .0 1 0 .9 9 8 .7 3 0 .6 5 1 0 4 .6 7 3 .2 4 0 .0 8 1 1 9 .8 5 2 .6 0 0 .8 8 1 .5 2

Q 3 2 0 0 2 1 .3 4 1 .6 2 0 .9 9 4 .7 1 1 .4 4 1 0 5 .4 1 3 .0 9 - 0 .4 4 1 2 1 .7 4 3 .1 7 1 .3 4 1 .5 6

Q 4 2 0 0 2 0 .2 0 2 .3 8 1 .0 5 6 .0 6 0 .7 1 1 0 4 .3 9 0 .3 6 - 0 .5 9 1 1 8 .7 5 2 .7 5 1 .9 2 1 .6 1

Q 1 2 0 0 3 - 0 .1 1 3 .2 4 1 .0 9 6 .6 3 3 .1 4 1 0 5 .4 0 - 1 .5 7 - 0 .0 4 1 1 8 .0 7 2 .7 3 1 .5 8 1 .5 9

Q 2 2 0 0 3 0 .0 6 0 .3 4 1 .1 5 2 .5 9 1 .1 6 1 0 3 .9 3 2 .5 4 0 .2 4 1 1 9 .8 7 4 .7 7 0 .2 9 1 .6 7

Q 3 2 0 0 3 2 .0 3 2 .1 7 1 .1 6 1 2 .5 1 - 0 .0 1 1 0 2 .5 9 2 .9 5 - 0 .6 4 1 1 1 .4 3 4 .0 7 1 .7 0 1 .6 7

Q 4 2 0 0 3 2 .4 8 2 .1 6 1 .2 7 1 1 .0 0 5 .3 8 1 0 3 .3 1 5 .4 7 - 0 .7 2 1 0 7 .1 3 4 .7 9 1 .6 5 1 .7 9

Q 1 2 0 0 4 2 .2 7 2 .3 2 1 .2 3 4 .5 7 4 .1 1 1 0 1 .3 9 4 .5 5 0 .6 0 1 0 4 .1 8 3 .0 6 1 .3 1 1 .8 5

Q 2 2 0 0 4 2 .1 2 2 .3 4 1 .2 2 5 .9 8 3 .9 2 1 0 2 .7 3 - 1 .0 5 - 0 .3 6 1 0 9 .4 3 1 .4 0 0 .9 8 1 .8 2

Q 3 2 0 0 4 1 .6 5 2 .0 0 1 .2 3 8 .3 2 3 .8 4 1 0 2 .6 7 2 .4 7 - 0 .0 4 1 1 0 .2 0 0 .5 3 1 .0 2 1 .8 2

Q 4 2 0 0 4 1 .3 0 2 .4 0 1 .3 5 7 .4 4 0 .7 1 9 8 .9 7 - 1 .7 9 1 .7 5 1 0 2 .6 8 1 .9 2 2 .3 6 1 .9 2

Q 1 2 0 0 5 0 .6 7 1 .5 0 1 .3 0 7 .8 1 2 .8 0 9 8 .6 6 2 .9 2 - 0 .9 1 1 0 7 .2 2 1 .2 7 2 .5 5 1 .8 9

Q 2 2 0 0 5 3 .0 2 2 .1 3 1 .2 0 6 .9 0 1 .6 8 9 9 .0 0 4 .5 5 - 1 .1 9 1 1 0 .9 1 3 .1 9 1 .8 5 1 .7 9

Q 3 2 0 0 5 2 .4 1 3 .1 2 1 .2 0 9 .3 1 2 .4 4 9 8 .5 5 2 .7 9 - 1 .3 6 1 1 3 .2 9 3 .3 8 2 .6 8 1 .7 5

Q 4 2 0 0 5 2 .3 8 2 .4 6 1 .1 9 9 .9 2 1 .7 7 9 8 .1 2 1 .1 5 0 .6 8 1 1 7 .8 8 3 .3 2 1 .3 5 1 .7 2

Q 1 2 0 0 6 3 .8 6 1 .6 2 1 .2 2 1 1 .6 0 2 .3 7 9 6 .8 4 0 .0 1 1 .3 1 1 1 7 .4 8 3 .0 8 1 .9 0 1 .7 5

Q 2 2 0 0 6 4 .2 7 2 .4 4 1 .2 8 7 .5 3 2 .9 6 9 6 .7 3 4 .5 1 0 .0 0 1 1 4 .5 1 1 .5 0 2 .9 5 1 .8 5

Q 3 2 0 0 6 2 .6 7 1 .9 9 1 .2 7 8 .3 6 1 .7 7 9 6 .3 2 1 .3 0 0 .4 0 1 1 7 .9 9 0 .9 0 3 .2 1 1 .8 9

Q 4 2 0 0 6 3 .9 5 0 .9 4 1 .3 2 9 .8 9 3 .9 6 9 4 .5 8 2 .5 0 - 0 .4 0 1 1 9 .0 2 2 .7 2 2 .6 0 1 .9 6

Q 1 2 0 0 7 3 .5 3 2 .2 1 1 .3 3 1 3 .9 7 3 .7 5 9 3 .9 7 4 .6 0 - 0 .2 4 1 1 7 .5 6 4 .2 3 2 .7 0 1 .9 6

Q 2 2 0 0 7 1 .9 1 2 .2 4 1 .3 5 9 .7 2 4 .6 3 9 1 .9 3 1 .1 0 0 .0 0 1 2 3 .3 9 4 .6 5 1 .5 3 2 .0 0

Q 3 2 0 0 7 2 .4 2 2 .0 7 1 .4 3 8 .5 0 7 .2 2 9 0 .6 2 - 1 .1 8 0 .1 2 1 1 4 .9 7 4 .7 9 0 .1 9 2 .0 4

Q 4 2 0 0 7 1 .5 1 4 .8 7 1 .4 7 9 .2 5 6 .1 7 8 9 .3 8 2 .5 0 2 .2 6 1 1 1 .7 1 2 .5 6 3 .9 2 2 .0 0

Q 1 2 0 0 8 2 .3 6 4 .1 4 1 .5 9 8 .7 3 7 .6 5 8 7 .9 4 2 .7 9 1 .3 0 9 9 .8 5 0 .1 0 3 .8 1 2 .0 0

Q 2 2 0 0 8 - 1 .5 4 3 .1 0 1 .5 6 6 .5 0 5 .9 9 8 8 .5 5 - 4 .6 6 1 .6 9 1 0 6 .1 7 - 5 .0 9 5 .3 3 2 .0 0

Q 3 2 0 0 8 - 2 .1 0 3 .0 4 1 .4 1 4 .2 1 2 .7 2 9 1 .2 4 - 5 .3 8 3 .2 8 1 0 5 .9 4 - 7 .9 2 5 .5 9 1 .7 9

Q 4 2 0 0 8 - 7 .2 1 - 1 .2 6 1 .3 9 - 0 .5 3 - 1 .2 7 9 1 .9 5 - 1 1 .8 1 - 2 .3 4 9 0 .7 9 - 9 .1 2 0 .5 1 1 .4 7

Q 1 2 0 0 9 - 1 0 .8 1 - 1 .0 7 1 .3 3 5 .3 3 - 1 .2 5 9 4 .0 2 - 1 9 .9 1 - 3 .1 4 9 9 .1 5 - 6 .3 2 0 .3 3 1 .4 3

Q 2 2 0 0 9 - 0 .8 5 - 0 .1 1 1 .4 1 1 2 .7 1 2 .1 6 9 2 .0 5 7 .7 9 - 1 .7 4 9 6 .4 2 - 0 .8 1 1 .8 2 1 .6 4

Q 3 2 0 0 9 1 .7 7 0 .9 6 1 .4 7 1 2 .1 1 4 .4 6 9 1 .1 2 - 1 .7 5 - 1 .8 3 8 9 .4 9 0 .9 3 3 .2 9 1 .6 1

Q 4 2 0 0 9 1 .5 4 1 .9 2 1 .4 3 7 .2 6 5 .2 5 9 0 .5 5 6 .5 4 - 1 .3 6 9 3 .0 8 2 .9 4 3 .0 8 1 .6 1

Q 1 2 0 1 0 1 .3 2 1 .7 6 1 .3 5 1 0 .7 4 4 .7 1 8 9 .7 9 8 .9 1 1 .3 6 9 3 .4 0 0 .6 4 4 .5 8 1 .5 2

Q 2 2 0 1 0 3 .6 9 1 .6 8 1 .2 3 7 .1 0 3 .0 9 9 0 .8 9 - 0 .6 6 - 1 .2 0 8 8 .4 9 4 .2 0 2 .5 7 1 .4 9

Q 3 2 0 1 0 1 .6 2 1 .5 3 1 .3 5 8 .7 8 3 .9 7 8 8 .2 7 3 .9 6 - 2 .6 8 8 3 .5 3 2 .4 7 1 .9 6 1 .5 6

Q 4 2 0 1 0 1 .0 7 3 .0 1 1 .3 3 6 .3 6 7 .9 8 8 7 .1 9 - 2 .4 1 1 .3 2 8 1 .6 7 - 2 .0 5 4 .2 7 1 .5 4

Q 1 2 0 1 1 3 .1 0 3 .5 9 1 .4 1 9 .0 5 6 .1 8 8 6 .4 4 - 3 .7 7 0 .4 0 8 2 .7 6 1 .5 8 7 .2 2 1 .6 1

Q 2 2 0 1 1 0 .6 5 2 .7 5 1 .4 5 7 .5 4 4 .7 5 8 5 .2 5 - 2 .1 7 - 0 .8 0 8 0 .6 4 0 .4 1 3 .6 8 1 .6 1

Q 3 2 0 1 1 1 .3 3 1 .2 4 1 .3 5 7 .5 2 5 .3 8 8 7 .6 6 1 .0 1 0 .0 8 7 7 .0 4 0 .7 0 3 .2 8 1 .5 6

Q 4 2 0 1 1 - 1 .0 3 2 .5 3 1 .3 2 5 .7 6 6 .1 2 8 9 .5 3 1 .6 3 - 0 .7 6 7 7 .2 0 - 0 .2 9 2 .6 4 1 .5 6

Q 1 2 0 1 2 - 3 .4 9 1 .6 9 1 .3 0 4 .9 3 4 .7 5 9 1 .4 9 0 .4 8 - 1 .5 3 7 7 .9 4 - 1 .6 0 1 .5 0 1 .5 6

Q 2 2 0 1 2 - 5 .4 0 0 .2 9 1 .2 5 4 .6 9 3 .1 8 9 4 .9 1 - 1 .2 9 - 2 .4 3 7 8 .2 5 - 2 .9 3 0 .2 6 1 .5 5

Q 3 2 0 1 2 - 6 .9 1 - 0 .9 9 1 .1 9 4 .6 7 2 .0 7 1 0 0 .2 7 - 3 .9 4 - 3 .8 5 7 8 .9 5 - 4 .2 5 - 0 .9 0 1 .5 3

Q 4 2 0 1 2 - 4 .9 2 - 0 .9 2 1 .1 8 6 .8 6 1 .2 2 9 8 .9 6 - 4 .2 3 - 3 .4 4 7 9 .1 4 - 3 .6 1 - 0 .7 0 1 .5 4

Q 1 2 0 1 3 - 2 .6 4 - 0 .4 9 1 .1 8 7 .9 1 1 .0 8 9 7 .4 8 - 3 .5 1 - 3 .1 9 7 9 .2 5 - 2 .4 1 - 0 .3 5 1 .5 3Q 2 2 0 1 3 - 0 .8 8 0 .0 2 1 .1 8 8 .2 3 1 .1 2 9 5 .8 9 - 2 .6 6 - 2 .7 8 7 9 .3 2 - 1 .1 9 0 .1 2 1 .5 3

Q 3 2 0 1 3 0 .3 5 0 .4 3 1 .1 9 8 .2 5 1 .2 1 9 4 .2 6 - 1 .7 7 - 2 .3 4 7 9 .3 8 - 0 .1 0 0 .5 7 1 .5 3

Q 4 2 0 1 3 1 .1 1 0 .7 1 1 .1 9 8 .1 8 1 .3 2 9 2 .6 6 - 0 .9 2 - 1 .9 3 7 9 .4 3 0 .7 6 0 .9 5 1 .5 2

Q 1 2 0 1 4 1 .5 0 0 .8 7 1 .2 0 8 .1 5 1 .4 4 9 1 .1 5 - 0 .1 4 - 1 .5 6 7 9 .5 1 1 .3 9 1 .2 5 1 .5 2

Q 2 2 0 1 4 1 .6 8 0 .9 9 1 .2 0 8 .1 6 1 .5 7 8 9 .7 5 0 .4 4 - 1 .2 5 7 9 .5 8 1 .8 3 1 .4 9 1 .5 2

Q 3 2 0 1 4 1 .7 4 1 .1 1 1 .2 0 8 .2 1 1 .7 3 8 8 .4 5 0 .8 3 - 0 .9 9 7 9 .6 3 2 .1 2 1 .6 9 1 .5 2

Q 4 2 0 1 4 1 .7 2 1 .2 3 1 .2 1 8 .2 8 1 .8 9 8 7 .2 5 1 .0 5 - 0 .7 6 7 9 .6 2 2 .3 0 1 .8 4 1 .5 2

N o t e s :

S o u r c e s f o r d a t a t h r o u g h 2 0 1 1 : Q 3 ( a s r e l e as e d t h r o u g h 1 1 / 0 8 / 2 0 1 1 ) . 2 0 1 1 : Q 3 i n t e r n a t i o n a l G D P d a t a b a se d o n s t a f f c a l c u l a t i o n s .

V a l u e s a f t e r t h a t d a t e e q u a l a s s u m p t i o n s f o r t h e s u p e r v i s o r y s t r e s s s c e n a r i o .

Va r ia b le s r e p o r t e d a s g r o w th r a te s a r e e xp r e sse d a s p e r ce n t ch a n g e s a t a n a n n u a l r a t e .

R e a l G D P gr o w t h : G r o s s D o m e s t i c P r o d u c t , b i l l i o n s o f c h a i n - w e i g h t e d 2 0 0 5 d o l l a r s , B u r e a u o f E c o n o m i c A n a l y s i s

N o m i n a l G D P g r o w t h : G r o ss Do me st i c Pr o d u ct , b i l l i o n s o f d o l l a r s , Bu r e a u o f Eco n o mic An a lys i s

CP I in f la t ion ra t e : Bu r e a u o f L a b o r S ta t i s t i cs

R e a l D i s p o sa b l e P e r s o n a l I n c o m e g r o w t h : B i l l io n s o f c h a i n - w e i g h t e d 2 0 0 2 d o l l a r s , e q u a l s n o m i n a l d i s p o s a b l e p e r s o n a l i n c o m e d i v i d e d b y t h e p r i c e

i n d e x f o r p e r s o n al c o n s u m p t i o n e x p e n d i t u r e s , B u r e a u o f Ec o n o m i c A n a l y s i s

N o m i n a l D i s p o s a b l e P e r so n a l I n c o m e g r o w t h : Bi l l i o n s o f d o l l a r s , Bu r e a u o f Eco n o mic An a lys i s

U n e m p l o y m e n t R a t e : Bu r e a u o f La b o r Sta t i s t i cs ( q u a r te r l y a ve r a g e o f mo n th l y d a t a )

3 - M o n t h T - B i l l R a t e : Q u a r t e r l y a ve r a g e o f 3 - m o n t h Tr e a su r y b i l l se co n d a r y ma r ke t r a te d i sco u n t b a s i s , Fe d e r a l Re se r ve Bo a r d

10-y r Treasury B ond Rat e : Q u a r t e r l y a ve r a g e o f y ie ld o n 1 0 - yr U.S . T r e a su r y b o n d , co n st r u c te d fo r FRB/US mo d e l b y Fe d e r a l Re se r ve sta f f

B B B Corpora t e B ond Rat e : Yie ld o n 1 0 - yr BBB- r a te d co r p o r a te b o n d , co n st r u c te d fo r FRB/US mo d e l b y Fe d e r a l Re se r ve s ta f f

M o r t g a g e R a t e : F r e d d i e M a c

D o w J o n e s T o t a l S t o c k M a r k e t I n d e x : E n d o f q u a r t e r v a l u e , D o w J o n e sNat iona l House P r ice I ndex : Co r e L o g ic ( se a so n a l l y a d ju s te d b y Fe d e r a l Re se r ve s ta f f )

CRE Price Index: Co mp o si te i n d e x cr e a te d b y Fe d e r a l Re se r ve s ta f f u s in g th e o f f i ce , r e ta i l , a n d in d u st r i a l NCREIF T r a n sa ct i o n Ba se d In d e xe s.

V I X : C h i c a g o B o a r d O p t i o n s E x c h a n g e

E uro A rea Rea l GDP Growt h : s t a f f c a l c u l a t i o n s b a s e d o n St a t i s t i c a l O f f i c e o f t h e E u r o p e a n C o m m u n i t i e s v i a H a v e r

E u r o A r e a I n f l a t i o n : s t a f f c a l c u l at i o n s b a s e d o n S t a t i s t i c a l O f f i c e o f t h e E u r o p e a n C o m m u n i t y v i a H a v e r

D e v e l o p i n g A s i a R e a l G D P G r o w t h : sta f f ca l cu la t i o n s b a se d o n Ba n k o f Ko r e a v ia Ha ve r , Ch in e se Na t io n a l Bu r e a u o f S ta t i s t i cs v ia CEIC,

In d ia n Ce n t r a l S ta t i s t i ca l O r g a n i za t i o n v ia CEIC, Ce n su s a n d S ta t i s t i cs De p a r t me n t o f Ho n g Ko n g v ia CEIC, a n d Ta iwa n Di r e c to r a t e -

G e n e r a l o f Bu d g e t , Acco u n t in g a n d S ta t i s t i cs v ia CEIC.

D e v e l o p i n g A s i a I n f l a t i o n : sta f f ca l cu la t i o n s b a se d o n Ba n k o f Ko r e a v ia CEIC, Ch in e se Sta t i s t i ca l In fo r ma t io n a n d Co n su l t a n cy Se r v i ce

v ia CEIC, a n d IMF Re ce n t Eco n o mic De v e lo p m e n ts , L a b o u r Bu r e a u o f In d ia v ia CEIC a n d IMF , Ce n su s a n d S ta t i s t i c De p a r tm e n t o f Ho n g

Ko n g v ia CEIC, Ce n su s a n d S ta t i s t i cs De p a r tm e n t o f Ho n g Ko n g v ia CEIC, a n d Ta iwa n Di r e c t o r a te - G e n e r a l o f Bu d g e t , Acco u n t in g a n d

Sta t i s t i cs v ia CEIC.

Japan Rea l GDP Grow t h : Ca b in e t O f f i ce v ia Ha ve r

J a p a n I n f l a t i o n : M i n i s t r y o f I n t e r n a l A f f a i r s a n d C o m m u n i c a t i o n s v i a H a v e r

UK Rea l GDP Growt h : O ff i ce o f Na t io n a l S ta t i s t i cs v ia Ha ve r

U K I n f l a t i o n : O ff i ce o f Na t io n a l S ta t i s t i cs ( u se s Re ta i l P r i ce In d e x to e x te n d se r ie s b a ck to 1 9 6 0 ) v ia Ha ve r

E xchange Rat es : B l o o m b e r g



Append ix B

M odels to Pro ject Net Incom e and St r essed Capi t a l

Th is append ix con ta ins descr ip t i ons o f the mode ls used to p ro jec t p re - tax ne t i ncome and

st ressed cap i ta l ra t i os fo r t he 19 BHCs par t i c i pa t i ng i n CCAR 2012 . The m ode ls fa l l in to fo u r b ro ad

ca tegor ies :

• M ode ls to p ro jec t losses on l oans i n th e accrua l l oan po r t fo l i o ;

• M o d e l s t o p r o j e c t o t h e r t yp e s o f l o sses, i n c lu d i n g o n se cu r i t i es , t r a d i n g a n d co u n t e r p a r t y

exposures, l osses re la ted to oper a t i on a l r i sk even ts , changes in fa i r va lue on l oans he ld fo r sa le

o r m e a su r e d u n d e r t h e f a i r va l u e o p t i o n , a n d mo r t g a g e r e p u r ch a se / p u t - b a ck l o sses ;

• M ode ls to p ro jec t th e e lem ent s o f PPNR ( revenues and non -cred i t re la ted expenses) ; and

• The m ode l th a t p ro jec ts cap i ta l ra t i os , g i ven p ro jec t i ons o f p re - tax net i ncom e, assum pt ions fo r

de t e rm in ing p rov i s ions i n to th e ALLL, and th e BHCs' p lanned cap i ta l ac t i on s.

B1. Losses on th e Accrual Loan Portfo lio

M ore than a dozen ind i v idua l m ode ls wer e used to p ro jec t l osses on l oans he ld in th e accrua l

l oan po r t fo l i o , spann ing a range o f i nd i v idua l l oan t yp es. These loan t y pes can b ro ad ly be d i v ided in to

w ho lesa le l end in g , such as com m erc ia l and in dust r i a l (C& I ) l oans and com m erc ia l rea l esta t e (CRE) l oans,

and re ta i l l end ing , i nc lud ing va r ious t ypes o f res iden t ia l mor tgages, c red i t ca rds, s tuden t l oans, au toloans, sma l l bus iness l oans, and o t he r con sum er l end ing . The m ode l descr ip t i o ns i n th i s sect i on cover

th e mo de ls deve lo ped fo r the m a jo r ca tegor ies o f w ho lesa le and re ta i l l oans. In som e cases, these

ma jo r ca tegor ies compr i se severa l sub-ca tegor ies , each w i th i t s own loss p ro jec t i on mode l , bu t the

mode ls fo r the va r ious sub-ca tegor ies a re s imi la r i n s t ruc tu re and approach .

There a re tw o genera l appr oaches tak en to m ode l i ng l osses on th e accrua l loan po r t fo l i o . In th e

f i r s t a p p r o a ch , t h e m o d e l s at t e m p t t o ca p t u r e t h e h i st o r i ca l b e h a v io r o f n e t ch a r g e - o f f s r e l at i ve t o

changes in m acroeco no m ic and f i nanc ia l m arke t va r iab les and loan po r t fo l i o characte r i s t i cs . In th e

second approach , the mode ls es t ima te l osses by p ro jec t i ng the p robab i l i t y o f de fau l t (PD) , l oss g i ven

de fau l t (LGD), and exposure a t de fau l t (EAD) fo r each q uar t e r t o f th e st r ess scenar io ho r i zon :

Loss t = PD t t imes LGD t t imes EAD t .



The p robab i l i t y o f de fau l t , PD, i s genera l l y mode led as pa r t o f a t rans i t i on p rocess, where cred i t s move

f r o m o n e p a ym e n t s t a t u s st a t e t o a n o t h e r ( e . g. , f r o m cu r r e n t t o d e l i n q u e n t ) i n r e sp o n se t o e co n o m i c

cond i t i ons. The PD is th e l as t o f th ese t r ans i t i ons, rep r esen t ing th e l i ke l i hood tha t a l oan w i l l en te r a

d e f a u l t e d s t a t e d u r i n g a g i ven p e r i o d . T h e n u m b e r o f p a ym e n t st a t u s st a t e s an d t h e t r a n s i t i o n p a t h s

d i f fe r b y l oan t y pe . Loss g i ven de fau l t , LGD, is t yp i ca l ly d e f i ned as a pe rcen t age o f th e exposur e a t

de fau l t (EAD) , and i s m ode led based on h i sto r i ca l da ta . Som et im es LGD is m ode led as a fun ct i o n o f

b o r r o w e r , co l la t e r a l , o r lo a n ch a r ac t e r i st i cs a n d t h e m a c r o e co n o m i c va r i a b l es f r o m t h e Su p e r v i so r y

Stress Scenar io , whi le in o ther cases, i t is assumed to be a f ixed percentage for a l l loans in a category.

F ina l l y , the approach to EAD var ies by l oan t ype , depend ing on whe ther the ou ts tand ing amoun t a t

d e f a u l t ca n va r y f r o m t h e cu r r e n t o u t s t a n d i n g l o a n b a la n ce ( fo r l e n d i n g i n vo l v in g so me f o r m o f c r e d i t

l i ne , fo r i ns tance) o r whe th er i t i s f i xed a t the cu r r en t l oan ba lance .

The mode ls p ro jec t l osses based on the de ta i l ed l oan po r t fo l i o da ta p rov ided by the BHCs on theregu la to ry rep or t s . These da ta descr ibe th e BHCs' l oan po r t fo l i os as o f Sep t em ber 30 , 2011 , so th e

m ode l i ng o f l osses focu ses p r im ar i l y on l osses ar i s ing f ro m loans in the accrua l l oan po r t fo l i o as o f tha t

da te . How ever , th e overa l l p ro jec t i on o f losses i nco rp ora t es l oans th a t a re o r ig ina t ed o r pu r chased a f te r

th e beg inn ing o f th e st ress scenar io h o r i zon . These increm ent a l l oan ba lances a re de t e rm ined based on

pro jec t i ons o f l oan ba lances ( tha t i s , the to ta l amoun t o f l oans he ld on the ba lance shee t ) ove r the s t ress

scenar io h or izon m ade by th e BHCs as par t o f the i r CCAR 2012 capi t a l p lan subm issions. The r isk

characte r i s t i cs o f these incrementa l ba lances a re assumed to be the same as those o f the o r ig ina l

Sep tember 30 , 2011 , l oan po r t fo l i o , excep t fo r l oan age in the re ta i l l end ing po r t fo l i os , where the impact

o f l oan season in g was inco rpor a ted . Th is i s a s im p le , bu t genera l l y conserva t i ve assum pt ion .

Loss p ro jec t i ons genera ted by the mode ls a re ad jus ted to take accoun t o f pu rchase accoun t ing

t r e a t m e n t , w h i ch r e co g n i ze s d i sco u n t s o n i m p a i r e d l o a n s a cq u i r e d d u r i n g m e r g e r s, a n d a n y o t h e r w r i t e -

o f f s al ready taken on loans he ld in th e accrua l l oan po r t f o l i o . Th i s ad jus tm en t i s m ade to en sure tha t

l osses re la ted to these loans a re no t dou b le -cou n t ed in th e p r o jec t i on s.

W holesale Lending: Large Com m ercial and Industr ial (C& I) Loans

Losses on l a rge commerc ia l and indust r i a l (C&I ) l oans a re mode led by est ima t ing the impact o f

m acroeco no m ic va r iab les on the p ro bab i l i t y o f de fau l t (PD) fo r these exposures. The f i r s t stage o f th e

m ode l i ng p rocess is es t im a t ion o f a se r ies o f equa t io ns re la t i ng h i s to r i cal changes in th e m ed ian

probab i l i t y o f de fau l t fo r 12 d i f fe ren t bo r rower i ndust r i es , s i x c red i t qua l i t y ca tegor ies , and coun t r i es o f

i nco rpora t i on to macroeconomic va r iab les , i nc lud ing changes in s tock p r i ce vo la t i l i t y and the sp read on



B BB - r at e d co r p o r a t e b o n d s . De f au l t p r o b a b i l i t y d a t a ar e d e r i ve d f r o m e xp e c t e d d e f a u l t f r e q u e n cy

est ima tes. These equa t ions a re used to p ro jec t quar te r l y changes in PD a t the bo r rower i ndust ry-cred i t

qua l i t y -coun t ry l eve l ove r the s t ress scenar io ho r i zon us ing va lues fo r the macroeconomic va r iab les as

speci f ied in the Supervisory Stress Scenar io .

The next s tage i s to use de ta i l ed , l oan- leve l i n fo rmat ion submi t ted by the 19 BHCs to ca l cu la te

expected l osses as o f Sep t em ber 30 , 2011 , fo r eve ry l oan . Probab i l i t y o f de fau l t f o r each loan i s

est im a ted by map p ing i t s i n te rna l c red i t ra t i ng ass igned by th e BHC to a stan dard i zed ra t i ng sca le and

th en l i nk ing th ese s tandard i zed ra t i ngs to de f au l t p ro bab i l i t i es . Loans th a t a re 90 days past due , on non -

accrua l , o r have an ASC 310-10 r ese rve as o f Sep t em ber 30 , 2011 , a re cons ide red t o be i n de fau l t and

are ass igned a PD o f 100 pe r cen t . Expected l oss is ca l cu la ted fo r each loan us ing th ese est im a ted de fau l t

p robab i l i t i es and superv i so ry assumpt ions abou t d rawdown ra tes (exposure a t de fau l t , o r EAD, wh ich i s

d e t e r m i n e d b y t h e r e l a t i ve le ve l o f t h e f u n d e d a n d u n f u n d e d co m m i t m e n t ) a n d l o ss g i ve n d e f au l t ( LGD),

w h ich i s de t e rm ined by th e l i ne o f bus iness, coun t ry , secured ve r sus unsecured , and FAS 114 rese rve , if

app l i cab le . These super v i so ry assum pt ions a re based on ana lys is o f h i s to r i ca l da ta .

In th e f i na l step , the pa th o f expect ed l osses over th e st r ess scenar io ho r i zon i s genera t ed by

a ssu mi n g t h a t e xp e c t e d l o sse s f o r e ve r y l o a n mo ve p r o p o r t i o n a t e l y t o t h e p r o j e c t e d ch a n g e i n PD f o r

th a t l oan 's i ndust ry , c red i t qua l i t y , and coun t ry , as m ode led i n th e f i r s t s tage . To t a l l osses fo r each BHC

are ca l cu la ted as th e sum o f p ro jec ted l osses across th e l oans.

W holesale Lending: Dom estic Com m ercial Real Estate (CRE) Loans

Losses on dom est i c com m erc ia l rea l esta t e (CRE) l oans a re m ode led by est im a t ing an i ndex o f

th e r i sk iness fo r each BHC's CRE por t f o l i o and t hen p ro jec t i ng l osses over t he s t ress scenar io ho r i zon by

anchor ing these index va lues to i ndust ry-w ide est ima tes o f CRE ne t charge-o f f ra tes under the

Supervisory Stress Scenar io . The r iskiness of each BHC's CRE port fo l io is ca lcu la ted using h istor ica l loan-

leve l da ta submi t ted by the BHCs, con ta in ing i n fo rmat ion abou t l oan characte r i s t i cs , i nc lud ing co l l a te ra l

( t ype o f p roper ty ) , geography (where the under l y ing p roper ty i s l oca ted ) , v in tage , l oan characte r i s t i cs

( f i xed o r f l oa t i ng ra te ) , and cu r ren t l oan- to -va lue (LTV) ra t i o , deb t se rv i ce coverage ra t i o , among o the r

characte r i s t i cs , and the BHC's i n te rna l r i sk ra t i ng fo r the l oan .

CRE loans a re d i v ided in to th ree ma jo r segments , fo l l ow ing regu la to ry repor t de f i n i t i ons:

m u l t i f a m i l y , co n s t r u c t i o n a n d l an d d e ve l o p m e n t , a n d n o n - f a r m, n o n - r e si d e n t i a l l o a n s. Fo r e a ch

segment , the f i r s t s tage i s to es t ima te a p rob i t mode l descr ib ing the p robab i l i t y tha t a l oan rece ives an

in te rna l c red i t ra t i ng ( tha t i s , a c red i t ra t i ng de te rmined by the BHC) a t o r be low the equ iva len t o f



CCC/Caa , based on loan- leve l characte r i s t i cs and supp lementa l i n fo rmat ion abou t the characte r i s t i cs o f

m arke t (geograph ic l oca t i on ) in w h ich th e under l y ing p rop er t y is l oca ted .

The resu l t s o f these est im a tes a re used to gen era t e an i ndex o f the r i sk iness o f each BHC's

m u l t i f a m i l y , co n s t r u c t i o n a n d l an d d e ve l o p m e n t , a n d n o n - f a r m, n o n - r e si d e n t i a l CRE p o r t f o l i o s, w h e r e

" r i sk iness" i s measured as the mode led l i ke l i hood tha t an average do l l a r i n the po r t fo l i o wou ld be ra ted

at or be low CCC/Caa. The r iskiness index is ca lcu la t ed fo r each BHC's CRE por t f o l io as of Sept em ber 30,

2011 . The m ode led l i ke l i hood i s used in p lace o f the actua l share o f do l l a r va lue l oans i n te rn a l l y ra ted a t

o r be low CCC/Caa in o rde r to cap tu re the t yp i ca l re la t i onsh ip be tween the d r i v ing va r iab les and in te rna l

cred i t q ua l i t y r a t i ngs, as a w ay o f accoun t ing fo r d i f fe r ences across BHCs in t he p rocess and ca l ib ra t i on

o f the i r i n te rna l ra t i ng systems.

CRE loss ra tes fo r i nd i v idua l BHCs are anchor ed to i ndust ry-w ide p ro jec t i ons o f ne t charge-o f f

ra tes fo r the b ank ing i ndu st ry as a w ho le und er th e Super v i so ry S t ress Scenar io . Spec i f i ca l ly , each BHC'sne t charge-o f f ra te i s assumed to d i f fe r f rom the average indust ry-w ide ra te accord ing to i t s es t ima ted

po si t ion in a m od eled d ist r ib ut ion f i t to th e CRE r isk ind ices across t he 19 BHCs. BHCs w i th r isk ind ices

a b o ve / b e l o w t h e a ve r a ge a r e p r o j e ct e d t o h a ve n e t ch a r g e -o f f r a t e s a b o ve / b e l o w t h e a g g r e ga t e r a t e t o

a co r r espond ing degree . These p ro jec ted ne t charge-o f f ra tes a re app l i ed to l oan ba lances i n each

quar t e r o f th e st r ess scenar io ho r i zon (as p ro v ided by the BHCs) to gener a te l oss am oun ts fo r th e

m u l t i f a m i l y , co n s t r u c t i o n a n d l an d d e ve l o p m e n t , a n d n o n - f a r m n o n - r e s id e n t i a l d o m e s t i c CRE p o r t f o l i o s.

Retail Lendin g: Dom estic Resident ial M ort gag es (First Lien, HELOC, HELOANs)

Losses on domest i c res iden t ia l mor tgages a re p ro jec ted by mode l i ng the impact o f l oan

characte r i s t i cs and macroeconomic va r iab les on the p robab i l i t y o f de fau l t (PD) and on loss g i ven de fau l t

(LGD) . The f i r s t stage o f th i s p rocess is to use h i sto r i ca l, l oan - leve l da ta to m ode l th e p ro bab i l i t y t ha t

l o a n s t r a n s i t i o n t o d i f f e r e n t p a ym e n t s t a t u se s. T h e se p aym e n t s t a t u se s in c l u d e cu r r e n t , d e l i n q u e n t , a n d

de fau l t - w her e th ese are de te r m ined by the nu m ber o f days a l oan paym ent i s past du e - as w e l l as

payo f f ( th e loan is repa id ) . The h i s to r i ca l da ta a re i ndust ry-w ide l oan da ta f ro m m any banks and

m or t gage loan o r ig ina to rs . Separa t e t r ans i t i on m ode ls are es t im a ted fo r th ree ca tegor ies o f c losed-end

f i rs t - l i en mor tgages - ad jus tab le ra te , f i xed ra te , and op t ion ad jus tab le ra te mor tgages; home equ i t y

l i nes o f c red i t ; and second - l i en ho m e equ i t y l oans. W h i le the spec i f i c de ta i l s va ry by l oan t yp e , in

g e n e r a l t h e m o d e l s me a su r e t h e p r o b a b i l i t y t h a t a l o an t r a n s i t i o n s f r o m o n e p a ym e n t s t a t e t o a n o t h e r

( e .g ., f r o m cu r r e n t t o d e l i n q u e n t o r f r o m d e l i n q u e n t t o d e f a u l t ) o ve r a q u ar t e r , g i ve n t h e ch a r ac t e r i st i cs



o f the l oan , bo r rowers and under l y ing p roper ty , as we l l as macroeconomic va r iab les such as l oca l house

p r i ce g r o w t h , t h e s t a t e w i d e u n e mp l o yme n t r a t e , a n d i n t e r e s t r a t e s .

T h e r e su l t i n g e s t i ma t e s a r e co m b i n e d w i t h i n d u s t r y - w i d e i n f o r m a t i o n a b o u t t h e ch a r a ct e r i s t i cs

o f ou ts tand ing res iden t ia l mor tgage loans as o f Sep tember 30 , 2011 , and the va r iab les de f i n ing the

Super v i so ry St r ess Scenar io to gener a te p ro jec t i ons o f de fau l t p ro bab i l i t i es ove r the s t ress scenar io

hor i zon . Ou t s tand ing l oans a re g rou ped in to segm ent s co r r espond ing to tho se on th e Y 14 -Q regu la to ry

repor ts , i nc lud ing i n i t i a l payment s ta tus (cu r ren t o r de l i nquen t ) , geography, v in tage , o r i g ina l bo r rower

FICO score , o r i g ina l LTV, and ( fo r hom e equ i t y p rod ucts) com b ine d LTV to gener a te segment - l eve l

de fau l t p ro bab i l i t i es . These segmen t - l eve l d e fau l t p r obab i l i t i es a re th en app l i ed to each BHC's ba lances

in th ese segm ent s as o f Sep t em ber 30 , 2011 , as repo r t ed by the BHCs on regu la t o ry repor ts . Th i s

p ro cess genera t es a BHC-spec if i c pa th o f p ro jec t ed de fau l t p ro bab i l i t i es ove r the s t ress scenar io ho r i zon .

Loss g i ven de f au l t i s ca l cu la ted based on a sta t i s t i cal m ode l t ha t i s es t im a ted us ing h i sto r i ca ld a t a f o r p r i va t e -l a b e l mo r t g a g e - b a cke d se cu r i t i e s. T h e mo d e l t a ke s i n t o a cco u n t t h e p r o j e c t e d p a t h o f

hou se p r i ces and th e l i ke ly p ro per t y va lue d i scoun t assoc ia ted w i th d i s t ressed sa les. These losses a re

p a r t i t i o n e d i n t o t h o se r e l a t e d t o n e t ch a r ge - o f f s o n t h e d e f a u l t e d l o a n s an d t h o se r e l a t e d t o e ve n t u a l

sale o f th e und er l y ing p roper ty (OREO expenses).

[ foo tnote ] 28 Exp e n se s r e l a t e d t o OREO a r e i n c l u d e d i n p r o j e c t i o n s o f PPNR.[endo f f o o t n o t e28.]

Changes in hous ing p r i ces up un t i l f o rec losu r e en d

(REO acqu is i t i on ) a re cap tu r ed in LGD, w h i l e changes a f te r fo rec losu r e and b e fo re sa le o f the p ro per t y

a re cap tu r ed in OREO expen ses. The LGD fo r l oans a l ready i n de fau l t as o f Sep t em ber 30 , 2011 , i nc ludes

f u r t h e r h o m e p r i ce d e c l in e s t h r o u g h t h e p o i n t o f f o r e c l o su r e . Fo r h o m e e q u i t y l i n es o f c r ed i t , b a l a n ce s

o u t s t a n d i n g a t t h e t i m e o f d e f a u l t ( EA D) ar e b a se d o n t h e p e r ce n t a g e o f c r e d i t l i n e d r a w n b e f o r e

d e f a u l t , w i t h h i g h e r d r a w n a mo u n t s a ssu me d t o r e su l t i n a d d i t i o n a l d r a w - d o w n s a n d h i gh e r e xp o su r e a t

de fau l t . Taken toge t he r , th e pa th o f PD and assum ed o r m ode led va lues o f LGD and EAD gener a te a

pa th fo r l osses by po r t fo l i o segment , wh ich a re aggrega ted to de te rmine overa l l l osses on the domest i c

res iden t ia l mor tgage loan po r t fo l i os a t each BHC.

Retail Lendin g: Credit Card s

Losses on cred i t ca rd po r t fo l i os a re p ro jec ted by mode l i ng the impact o f bo r rower and accoun t

ch a r a ct e r i s t i cs an d m a c r o e co n o m i c va r i ab l e s o n t h e p r o b a b i l it y o f d e f a u l t ( PD) f o r d i f f e r e n t t yp e o f

cred i t ca rd p r odu cts . The f i r s t s tage o f th i s p rocess i s to u se h i s to r i ca l , l oan - leve l da ta to m ode l t he

probab i l i t y tha t l oans t rans i t i on to d i f fe ren t payment s ta tus s ta tes . These payment s ta tus s ta tes i nc lude



cu r r e n t , d e l i n q u e n t , a n d d e f a u l t - w h e r e t h e se ar e d e t e r m i n e d b y t h e n u m b e r o f d a ys a l o a n p aym e n t i s

past due . The h i s to r i ca l da ta a re i ndust ry-w ide da ta f rom many banks. Separa te t rans i t i on mode ls a re

est im a ted fo r bank ca rds and charge ca rds. W h i le the spec i f i c de ta i l s va ry by l oan t yp e , in genera l t he

m o d e l s me a su r e t h e p r o b a b i l i t y t h a t a lo a n t r a n s i t i o n s f r o m o n e p a ym e n t s t a t e t o a n o t h e r ( e .g ., f r o m

cu r r e n t t o d e l i n q u e n t o r f r o m d e l i n q u e n t t o d e f a u l t ) o ve r a si x - mo n t h p e r i o d , g i ven t h e ch a r a c t e r i st i cs o f

t h e l o a n an d b o r r o w e r , a s w e l l as m a c r o e co n o m i c va r i ab l e s su ch a s t h e u n e m p l o ym e n t r a t e .

T h e r e su l t i n g e s t i ma t e s a r e co m b i n e d w i t h i n d u s t r y - w i d e i n f o r m a t i o n a b o u t t h e ch a r a ct e r i s t i cs

o f ou t s tand in g cred i t ca rd fac il i t i es as o f Sep t em ber 30 , 2011 , and th e va r iab les de f i n ing th e Superv i so ry

St r ess Scenar io to genera t e p ro jec t i ons o f de fau l t p ro bab i l i t i es ove r the s t ress scenar io h o r i zon . These

de fau l t ra tes a re app l i ed to p ro jec t i ons o f ou ts tand ing ba lances a t the t ime o f de fau l t , where ba lances

pro jec t i ons re f l ec t t yp i ca l ba lance behav io r as accoun ts t rans i t i on across payment s ta tus s ta tes (e .g . ,

b a l a n ce d r a w - d o w n s as a cco u n t s t r a n s i t i o n f r o m cu r r e n t t o d e l i n q u e n t o r f r o m d e l i n q u e n t t o d e f a u l t ) .

Typ ica l ba lance behav io r i s ca l i b ra ted us ing cross- f i rm da ta subm i t t ed by the BHCs on regu la to ry repor t s .

F ina l ly, loss g iven defaul t is the same for a l l BHCs but f ixed by card type (bank card versus charge card) ,

where the l oss sever i t y ra te i s ca l i b ra ted us ing da ta f rom the BHCs over a pe r iod o f economic downtu rn

- t h e f i r st q u a r t e r o f 2 0 0 8 t o t h e f o u r t h q u a r t e r o f 2 0 0 9 .

Cred i t ca rd accoun ts ou ts tand ing as o f Sep tember 30 , 2011 , a re g rouped in to segments de f i ned

by fac to rs such as i n i t i a l payment s ta tus (cu r ren t o r de l i nquen t ) , geography, v in tage , c red i t l i ne , and

bor row er F ICO score . Losses fo r each segm ent a re genera t ed as th e p rod uct o f p ro jec ted

PD* LGD* ou t s tand in g ba lances over the st ress scenar io ho r i zon fo r i ndu st ry-w ide l oans i n th a t segm ent .

Quar te r l y l oss resu l t s a re genera ted f rom the s i x -mon th mode led resu l t s by d i v id ing l osses fo r each s i x -

m on t h pe r iod i n ha l f . These quar te r l y , segmen t - l eve l l oss ra tes a re th en app l i ed to each BHC's ba lances

in th ese segm ent s as o f Sep t em ber 30 , 2011 , as repo r t ed by th e BHCs on regu la to ry rep or t s . Th i s

p ro cess genera t es a BHC-spec if i c pa t h o f p ro jec ted l oss ra tes over th e s t ress scenar io ho r i zon .

Retai l Lending: Auto Loans

Lo sse s o n au t o l o a n p o r t f o l i o s a r e p r o j e ct e d b y mo d e l i n g t h e i mp a c t o f b o r r o w e r a n d a cco u n t

characte r i s t i cs and m acroeco nom ic va r iab les on the p ro bab i l i t y o f de fau l t (PD) . Th e f i r s t stage o f th i s

p ro cess i s to use h i sto r i ca l, l oan - leve l da ta to m ode l the p r obab i l i t y th a t l oans t r ans i t i on to de f au l t -

w h e r e d e f a u l t i s d e t e r m i n e d b y t h e n u m b e r o f d a ys a l o a n p a yme n t i s p a st d u e o r b y a c t i o n s o f t h e

bor rower (bankrup tcy) and the l ender ( repossess ion ) . The h i s to r i ca l da ta a re i ndust ry-w ide da ta f rom

m a n y b a n ks a n d a u t o l o a n o r i gi n a t o r s co m p i l e d b y a n i n d u s t r y ve n d o r a n d su p p l e m e n t e d b y d a t a



co l l ec ted by th e Federa l Reserve . The mo de l m easures th e p robab i l i t y th a t a l oan t r ans i t i on s f ro m i t s

i n i t ia l p a yme n t s t a t e ( e .g ., cu r r e n t o r d e l i n q u e n t ) t o d e f a u l t o ve r f u t u r e s i x - mo n t h p e r i o d s, g ive n t h e

ch a r a ct e r i s t i cs o f t h e l o a n an d b o r r o w e r , a s w e l l as ma c r o e co n o m i c va r i ab l e s su ch a s t h e u n e m p l o ym e n t

ra te and house p r i ce i ndex.

The resu l t i ng equa t ions a re used to genera te es t ima ted de fau l t p robab i l i t i es ove r the pe r iod

2007 to 2011 us ing i n fo rm at ion on au to l oans ou t s tand in g a t each o f the 19 CCAR BHCs dur ing th a t

pe r iod . These est ima ted PDs a re comb ined w i th es t ima tes o f l oss g i ven de fau l t and exposure a t de fau l t

to gener a te es t im a ted au to l oan losses a t each o f th e 19 BHCs over th e pe r iod 2007 to 2011 . Exposure

a t de fau l t i s p ro jec ted based on the t yp i ca l pa t te rn o f pay-downs and ba lances o f de fau l t i ng l oans i n

h i s to r i ca l c red i t bu reau d a ta . Loss g i ven de fau l t i s a l so based on h i s to r i ca l i n fo rm at ion and on

su p e r v i so r y i n f o r m a t i o n a b o u t t yp i cal a ssu m p t i o n s m a d e b y B HCs in t h e i r i n t e r n a l m o d e l s .

These est im a ted losses are reg ressed against ac tua l au t o l oan ne t char ge-o f f s a t the 19 BHCsf rom 2007 to 2011 , a long w i th va r iab les cap tu r ing o the r au to l oan po r t fo l i o characte r i s t i cs . Th i s p rocess

i s i n tended to ensure tha t the f i na l l oss p ro jec t i ons i nco rpora te impor tan t r i sk characte r i s t i cs o f au to

l o a n p o r t f o l i o s t h a t a r e n o t i n c l u d e d i n t h e h i s t o r i ca l i n d u s t r y d a t a , b u t w h i ch a r e a vai l ab l e f r o m t h e

de t a i l ed da ta co l l ected f r om th e BHCs. Pro jec ted au to l oan losses over the s t ress scenar io ho r i zon a re

genera t ed based on th e characte r i s t i cs o f each BHC's au to l oan po r t fo l i o as o f Sep t em ber 30 , 2011 us ing

t h e i n d u s t r y m o d e l p a r a m e t e r s a n d t h e r e su lt s o f t h e se co n d - s t a g e r e g r e ss io n m o d e l .

Retai l Lending: Other Retai l Lending

The o the r re ta i l l end ing p roduct po r t fo l i os i nc lude the sma l l bus iness l oan po r t fo l i o , the o the r

co n su m e r l o a n p o r t f o l i o , t h e s t u d e n t l o a n p o r t f o l i o , t h e co r p o r a t e c r e d i t ca r d p o r t f o l i o , a n d

in t e rna t i ona l re ta i l po r t fo l i os . Due to da t a lim i ta t i o ns and the re la t i ve sm a l l s ize o f th ese po r t fo l i os , loan

leve l mode ls o f de fau l t a re no t feas ib le .

The mode ls des igned to p ro jec t c red i t l osses on o the r re ta i l l end ing po r t fo l i os use r i sk segment

leve l da ta to i den t i f y the dynamic d r i ve rs o f r i sk a f te r con t ro l l i ng fo r the r i sk characte r i s t i cs o f the l oans

w i th in t he po r t fo l i os . Risk segmen ts d i v ide th e po r t fo l i o by characte r i s t i cs such as bo r row er cred i t

sco re , l oan v in tage , t yp e o f fac il i t y (e .g ., i ns ta l lmen t ve r sus revo lv ing ) , and geograph ic r eg ions fo r

i n t e rna t i ona l po r t fo l i os . Fo r each p ro duct , a system o f equ a t ion s rep r esen t ing the de l i nq uency ra te ,

de fau l t ra te , and charge-o f f ra te i s m ode led . Each ra te is m ode led as a fun ct i o n o f the l ags o f the r a te i n

th e p rev ious de l i nq uency s ta te , macro econo m ic va r iab les , and sta t i c r i sk characte r i s t i cs . By i nc lud ing

lags o f the ra te i n the p rev ious de l i nquency s ta te , these mode ls imp l i c i t l y cap tu re the ro l l ra te dynamics



o f th e d i f fe ren t p rod uct t ypes. The sta t i c r i sk characte r i s t i cs o f th e under l y ing l oans, such as o r ig ina t i on

c r e d i t sco r e s a n d l o a n - t o - va lu e r a t i o s, a r e i n t e r a ct e d w i t h t h e m a c r o e co n o m i c va r i ab l e s t o i d e n t i f y t h e

d i f fe rences i n sens i t i v i t i es o f the l osses i n d i f fe ren t r i sk segments to f l uc tua t i ons i n the macroeconomic

var iab les . Fo r each p rod uct , econom ic th eor y and th e ins t i tu t i on a l characte r i s t i cs o f th e p rodu ct gu ide

t h e i n c l u si o n a n d l ag st r u c t u r e o f t h e m a c r o e co n o m i c va r i a b l e s.

Pro jec ted l osses fo r each BHC a re gener a ted by seed ing th ese m ode ls w i th t he r i sk

characte r i s t i cs o f the BHC's l oan po r t fo l i o as o f Sep t em ber 30 , 2011 , a long w i th l agged (ac tua l ) va lues o f

de l i nquency, de fau l t , and charge-o f f ra tes and ro l l i ng the equa t ions fo rward over the s t ress scenar io

h o r i zo n .

B2. Other Losses

Securi t ies in the AFS and HTM Portfol ios Losses on secur i t i es he ld i n th e AFS and HTM po r t f o l i os a re p ro jec ted o t he r - th an- t em po ra ry

im pa i rm en t (OTTI) ove r th e s t ress scenar io h o r i zon . Fo l l ow ing U.S. GAAP, OTTI p ro jec t i ons i nco rp ora t e

o t h e r - t h a n - t e m p o r a r y d i f f e r e n ce s b e t we e n a m o r t i ze d co st a n d f a i r ma r ke t va l u e d u e t o c r e d i t

i mp a i r me n t , b u t n o t d i f f e r e n ce s r e f le c t i n g ch a n g e s i n l i q u id i t y o r m a r ke t co n d i t i o n s . So m e o f t h e

AFS/HTM secur i t i es a re assumed no t to be a t r i sk fo r the k ind o f c red i t impa i rmen t tha t resu l t s i n OTTI

charges, inc lud ing U.S. T reasury and U.S. govern m ent agency ob l i ga t i ons and U.S. gover nm ent agency

m or tgage-backed secur i t i es (M BS) . The rem a in ing secur i t i es can be g rou ped in t o tw o bas ic ca tegor ies :

secur i t i za t i ons, where the va lue o f the secur i t y depends on the va lue o f an under l y ing poo l o f co l l a te ra l ,

and d i rec t ob l i ga t i ons such as co rpora te o r sovere ign bonds, where the va lue o f the secur i t y depends

pr imar i l y on the cred i t qua l i t y o f the i ssuer .

[ foo tnote ] 29 Eq u i t i e s a r e a l so h e ld i n t h e AF S a n d HT M p o r t f o l i o s , a l t h o u g h i n sm a l l a m o u n t s . L o sse s o n t h e se p o s i t i o n s w

ca l cu l a t e d b y a p p l y i n g m a r ke t va l u e sh o cks b a se d o n t h e e q u i t y p r i ce s ch a n g e s i n t h e Su p e r v i so r y S t r e ss Sce n a r i o .[endo f f o o t n

Federa l Reserve ana lys ts deve loped o r imp lemented ten

separa te mode ls to p ro jec t OTTI , re f l ec t i ng d i f fe rences i n the bas i c s t ruc tu re o f the secur i t i es

(secur i t i zed ve rsus d i rec t ob l i ga t i on ) and d i f fe r ences in under l y ing co l l a te ra l and ob l i go r t ype . Overa l l ,

t h e OTTI p ro jec t i ons i nvo l ve ana lysi s o f mo re than 80 ,000 ind i v idua l po s it i on s a t th e CUSIP leve l.

In genera l te r m s, th e appro aches used fo r CCAR 2012 are based on app roaches u sed by banks

and BHCs in de t e rm in ing w hen a secur i t y i s sub jec t to an OTTI im pa i rm en t ch arge . Fo r secur i t i zed

o b l i g at i o n s , cr e d i t a n d p r e p a ym e n t m o d e l s e s t i ma t e d d e l i n q u e n cy , d e f au l t , se ve r i t y , a n d p r e p a ym e n t

vecto rs on th e under l y ing poo l o f co l l a te ra l und er the Super v i so ry St ress Scenar io . In m ost cases, th ese

p r o j e c t i o n s i n co r p o r a t e r e l a t i ve ly d e t a i le d i n f o r m a t i o n o n t h e u n d e r l y i n g co l la t e r a l ch a r ac t e r i st i cs f o r



each ind i v idua l secur i t y , de r i ved f rom commerc ia l da tabases tha t con ta in l oan- leve l co l l a te ra l and

secu r i t y st r u c t u r e i n f o r m a t i o n . De l in q u e n cy , d e f a u lt , se ve r i t y an d p r e p a ym e n t ve c t o r s w e r e p r o j e c t e d

e i the r us ing econo m et r i c mo de ls deve lo ped by th e Federa l Reserve o r i ndust ry vendo r mo de ls des igned

t o p r o j e c t t h e se es t i ma t e s i n st r e sse d e co n o m i c e n v i r o n m e n t s . T h e se ve ct o r s w e r e t h e n a p p l i e d t o a

commerc ia l cash f l ow eng ine tha t cap tu res the spec i f i c s t ruc tu re o f each secur i t y (e .g . , t ranche ,

subord ina t i on , and payment ru les) to ca l cu la te the i n t r i ns i c va lue (p resen t va lue o f the cash f l ows) fo r

th a t secur i t y . If t h e p ro jec t ed i n t r i ns i c va lue was less th an the va lue a t w h ich the secur i t y i s be ing

car r i ed on the BHC's ba lance shee t (amor t i zed cost ) , then the secur i t y was cons ide red to be o the r than

t e m p o r a r i l y i mp a i r e d a n d OTT I w a s ca l cu l a t e d a s t h e d i f f e r e n ce b e t w e e n a m o r t i ze d co s t a n d i n t r i n s ic

va lue .

For d i rec t ob l i ga t i ons, the bas i c appr oach i s to assess th e p r obab i l i t y o f de fau l t o r severe cred i t

de t e r io r a t i on fo r each secur i t y i ssuer o r g roup o f secur i t y i ssuers ove r th e st r ess scenar io ho r i zon .Probab i l i t y o f de fau l t was e i the r mode led d i rec t l y o r i n fe r red by mode l i ng changes in expected de fau l t

f req uen c ies o r c red i t de fau l t sw ap (CDS) sp reads fo r th e bond s in quest i on . A secur i t y w as cons ide red t o

be o the r than tempora r i l y impa i red i f t he p ro jec ted va lue o f the PD o r CDS sp read crossed a p re -

de te rmined th resho ld l eve l , genera l l y the l eve l cons i s ten t w i th a CCC/Caa ra t i ng , a t any po in t du r ing the

st ress scenar io ho r i zon . Loss g i ven de fau l t o n these secur i t i es was based on h i sto r i ca l da ta on bon d

recovery r a tes . OTTI w as ca l cu la ted as th e d i f fe ren ce be tw een the bo nd 's amo r t i zed cost and it s

p ro jec ted va lue under the Superv i so ry S t ress Scenar io .

No OTTI charges a re ass igned t o secur i t i es assum ed to be acqu i red by th e BHCs a f te r Sep t em ber

30 , 2011 , ( " i ncrementa l ba lances" ) , s ince these a re assumed to be pu rchased a t a l ready d i scoun ted

pr i ces. Th is assum pt ion i s a l so cons isten t w i th h i s to r i ca l da ta show ing th a t the com posi t i o n o f th e AFS

a n d HT M p o r t f o l i o s t e n d s t o sh if t t o w a r d U .S. T r e a su r y a n d a g e n cy o b l i g a t i o n s i n t i m e s o f e co n o m i c

st ress, suggest ing tha t i ncrem ent a l AFS/ HTM ba lances are l ess l i kel y to be a t r i sk o f genera t i ng OTTI

charges.

Trading and Counterparty Credit Risk

The methods used to p ro jec t l osses on t rad ing pos i t i ons and coun te rpa r ty r i sk exposures a l so

t a ke a cco u n t o f t h e a cco u n t i n g t r e a t m e n t o f t h e se p o si t i o n s . Po s it i o n s in t h e t r a d i n g acco u n t a r e

marked to marke t on a da i l y bas i s , so the approach used to genera te l oss p ro jec t i ons on t rad ing

p o s i t i o n s is in t e n d e d t o ca p t u r e t h e m a r ke t va l u e i mp a c t o f t h e g l o b a l f i n a n c i al m a r ke t sh o ck . T o t a l

p o t e n t i a l lo sse s o f t r a d i n g p o s it i o n s u n d e r a s t r e ssed m a r ke t e n v i r o n m e n t ca n b e b r o ke n o u t i n t o t w o



pr im ary types. The f i rst i s th e loss ar ising f rom a decrease in th e m arke t va lue o f a l l t r ad ing p os i t ions,

regard less o f th e BHC's coun t e rpar t ies. The second is th e coun te r par t y c red i t r i sk stem m ing f ro m bo th

changes in th e size o f coun t e rpar t y exposures and de te r io r a t ion o f coun t e rpar t ies' c red i tw or t h iness

under s t ressed m arke t cond i t ions, w h ich adverse ly a f fec ts th e r i sk iness o f pos i t i ve ly va lued t rad ing

pos i t ions. The m ode ls used to p ro jec t losses on t rad ing p os i t ions under th e globa l f inanc ial m arke t

shock take account o f both sources of losses.

The approach used to genera t e m arke t va lue losses on t r ad ing pos i t ions re l ies on BHC est ima t es

o f th e sens i t i v i ty o f t he va lue o f t hese pos i t ions to changes in a w ide r ange o f m arke t ra tes, p r i ces,

spreads, and vo lat i l i t ies. The imp act o f th e mark et r isk shock is ca lcu lated by mu l t ip ly ing th ese

sens i t i v i t ies by the r i sk fac to r changes inc luded in the g loba l f inanc ia l m arke t shock deve loped by the

Federa l Reserve. These shocks are assumed to be instantaneous and no addi t ional hedging or changes

in posi t ions a re inco rpor a ted in to t he loss ca lcu la t ion . The resu l t ing num bers were ad jus ted to take

accoun t o f po s it ions no t w e l l cap tu r ed in th e da ta repor t ed by the BHCs. These ad jus tm en ts w ere b ased

on add i t iona l in f o rm at ion p rov ided by th e BHCs, and the increm enta l losses f ro m t hese sources

iden t i f ied in th e i r ow n g loba l f inanc ia l marke t shock p ro jec t ions, as repor ted in the i r cap i ta l p lans.

The approach used to genera te coun te rpar ty c red i t losses a t tempts to cap tu re the impact o f the

g loba l f inanc ia l m arke t shock on t he cred i t va lua t ion ad jus tm en ts (CVA) o f the s ix BHCs wi th la rge

t r ad ing pos i t ions. CVAs a re add i t ion a l ad jus tm en ts to the m ark- to -m arke t va lua t ion o f the BHCs' t r ad ing

por t fo l ios to cap tu re th e impact o f coun te rp ar ty c red i t r i sk - th e r i sk th a t a coun t e rpar t y to a de r ivat i ve

or o th e r t rad ing pos i t ion w i l l de fau l t on i ts ob l iga t ions. These p r o jec t ions a re made us ing da ta on

basel ine and stressed exposure, loss g iven defaul t (LGD), and probabi l i ty o f defaul t (PD) of the

coun t e rpar t y , to d e te rm ine a base l ine and st r essed CVA. The CVA loss is th e d i f fe rence be tw een t he

basel ine and st ressed va lues of CVA.

In add i t ion t o cap tu r ing the im pact o f the g loba l t rad ing shock on CVAs, the m ode ls also cap tu r e

the po ten t ia l add i t iona l impact o f ac tua l de fau l ts o f ind iv idua l coun te rpar t ies and ob l igo rs , o r

increm enta l d e fau l t - re la ted losses ( IDR) in excess o f the m ark- to -m arke t losses assoc ia ted w i th t he

de fau l t ing ob l igo rs . The mo de ls fo r IDR s im u la te loss f ro m jum p- t o -de fau l t fo r va r ious ca tegor ies o f

ob l igo rs and coun t e rpar t ies, g rouped by p roduct t ype and cred i t ra t ing . IDR is an est im a te o f losses

f ro m j u m p - to -d e fa u l t i n t h e ta i l o f t h e d i s t r i b u t i o n o f d e fa u l t s , wh e re th e t a il p e rce n t i l e wa s ca li b ra te d

to th e shocks in th e macroecon om ic scenar io . The mode l has th ree key com ponen ts : asset co r re la t ions

th a t de t e rm ine the co rre la t ion o f ob l igo r de fau l ts , LGD, and the cred i t qu a l ity o f ob l igo rs and

coun t e rpar t ies. Fo r IDR on co l la te ra l i zed coun t e rpar t y c red i t pos i t ions, th e p ro jec t ions assum e a marg in



per iod o f r i sk a f te r the i n i t i a l marke t shock du r ing wh ich no add i t i ona l co l l a te ra l f l ows a re recogn ized

and de fau l t r i sk i s e leva ted t o re f l ec t th e fund in g st r ess f ro m co l l a te ra l ca l ls .

The g loba l f i nanc ia l marke t shock ca l cu la t i ons fo r t rad ing and coun te rpa r ty pos i t i ons a re made

j u st f o r t h e si x BH Cs w i t h la r ge t r ad in g o p er at io n s, la r ge ly b eca u se t r ad in g o p er at io n s ar e a

p r o p o r t i o n a t e l y m o r e s ig n i f i ca n t d r i ve r o f r isk a n d p e r f o r m a n ce a t t h e se f i r m s t h a n a t t h e o t h e r 1 3 B HCs

par t ic ip at in g in CCAR 2012. No net heless, t he Federa l Reserve 's pro ject io ns of PPNR fo r a ll 19 BHCs

incorpora te the impact o f the Superv i so ry S t ress Scenar io on the revenues genera ted by day- to -day

t r ad ing act i v i t i es such as m arke t m ak ing fo r custom ers and cl i en ts . W h i le t he t rad ing act i v i t i es o f a l l t h e

BHCs a re the re fo re re f l ec ted i n the s t ress scenar io p ro jec t i ons, l im i t i ng the g loba l f i nanc ia l marke t shock

to t he s i x w i th ve ry l a rge t r ad ing op era t i o ns m eans th a t th e ana lysi s is m ore s t r i ngen t f o r t hese BHCs in

ways tha t re f l ec t the r i sks genera ted by the i r bus iness act i v i t i es and marke t focus.

Losses Related to Opera tio nal Risk Events

The mode l used to genera te p ro jec t i ons o f opera t i ona l r i sk l osses p ro jec ts opera t i ona l r i sk

losses for the 19 BHCs as a group and then d ist r ibutes these aggregate losses across the BHCs in

p r o p o r t i o n t o t h e i r Q3 2 0 1 1 t i e r 1 co mm o n ca p i t a l . T h i s a p p r o a ch r e f l e c t s t h e i d i o syn c r a t i c n a t u r e o f

oper a t i on a l r i sk even t s , as w e l l as d i f fe r ences across th e 19 BHCs in th e w ay these even t s are cap t u red

and repor ted i n t he da ta subm i t t ed to th e Federa l Reserve , w h ich suggest th a t i ndust r y- l eve l p ro jec t i ons

m i gh t b e mo r e r o b u s t t h a n f i r m- sp e c if i c r e su l t s .

The p ro jec t i ons o f i ndust ry- l eve l opera t i ona l r i sk l osses have two p r imary componen ts . The f i r s t

co m p o n e n t p r o j e c t s t h e n u m b e r o f o p e r a t i o n a l r i sk e ve n t s l ike ly t o b e e xp e r i e n ce d b y e a ch o f t h e 1 9

BHCs under the Supervisory Stress Scenar io . These pro ject ions are based on a large database co l lected

by th e Federa l Reserve o f opera t i ona l r i sk even ts exper ienced by th ese BHCS dur ing th e years 2004 to

2010 . The da ta a re g rou ped in to seven ca tegor ies o f opera t i ona l r i sk even t t yp es, based on th e

ca tegor ies used in Base l cap i ta l cha rges fo r oper a t i on a l r i sk .

[ f o o t n o t e ] 3 0 T h e se ve n o p e r a t i o n a l r i s k t yp e ca t e g o r i e s a r e i n t e r n a l f r a u d ; e x t e r n a l f r a u d ; e m p lo ym e n t p r a c t i ce s a n d

wo r kp la ce sa f e t y ; c l i e n t s , p r o d u c t s a n d b u s in e ss p r a c t i ce ; d a m a g e t o p h ys i ca l a sse t s ; b u s i n e ss d i s r u p t i o n a n d

sys t e m f a i l u r e ; a n d e xe cu t i o n , d e l i ve r y a n d p r o ce ss m a n a g e m e n t .[endof f o o t n o t e30.]

The g rouped da ta a re used to ca l i b ra te

t h e m o d e l , al o n g w i t h va r i a b l es t h a t ca p t u r e m a c r o e co n o m i c co n d i t i o n s a n d B HC- sp e c i f ic

characte r i s t i cs . The f requ ency o f oper a t i on a l r i sk even ts i s p ro jec ted b y even t t ype fo r each BHC us ing

t h e m o d e l cal i b r a t e d o n i n d u s t r y - w i d e d a t a w i t h d e scr i p t i ve d a t a f o r t h e B HC a n d t h e va r i ab l e s in t h e

Supervisory Stress Scenar io .



The second componen t o f the mode l i s an est ima te o f the expected sever i t y (do l l a r l oss) o f the

oper a t i on a l r i sk even ts . Sever i t y i s ca l cu la ted us ing h i sto r i ca l oper a t i on a l l oss da ta , w i t h separa t e

sever i t y es t im a tes fo r each o f th e seven d i f fe ren t ca tegor ies o f opera t i ona l r i sk even t . Opera t i ona l r i sk

losses a re gener a ted by p ro jec t i ng the f req uen cy o f l osses fo r each o f the 19 BHCs under th e Superv i so ry

St r ess Scenar io fo r each opera t i ona l r i sk t y pe ca tegory and th en app ly ing th e co r respo nd in g sever i t y

assum pt ion . The opera t i ona l r i sk losses are sum m ed across even t t y pes and BHCs to ge t the aggrega te

fo r th e g roup . Th is aggregate i s th en re -d i s t r i bu t ed to the i nd i v idu a l BHCs in p ro por t i o n to each BHC's

t i e r 1 co m m o n e q u i t y a s o f Se p t e m b e r 3 0 , 2 0 1 1 .

Loans Held for Sale or M easured Under the Fair Value Option

Cer t a in l oans a re no t accoun t ed fo r on an accrua l bas is . Loans to w h ich th e fa i r va lue o p t i on

(FVO) is appl ied are marked to market , whi le loans classi f ied as he ld for sa le (HFS) are carr ied at thelow er o f am or t i zed cost o r marke t va lue . These loans w ere i den t i f i ed by th e BHCs in th e r egu la to ry

repo r t s subm i t t ed as pa r t o f th e CCAR process. Sim i la r to o t he r m ark- t o -m arke t pos i t i ons on th e BHCs'

ba lance shee ts (e .g ., t r ad ing accoun t p os i t i ons) , changes in va lue o f th ese loans w ere ca l cu la ted under

th e assum pt ions o f th e g loba l f i nanc ia l m arke t shock. The spec i f i c appr oach va r ied by th e t y pe o f l oan .

The appr oach used to s t ress C& I l oans he ld under FVO and HFS accoun t ing s tandard s was b ased

on a set o f shocks app l i ed to ou t s tand in g and com m i t t ed C& I l oan ba lances. Loan por t fo l i os w ere

segmented based on investmen t g rade and sub- investmen t g rade ra t i ngs as repor ted by the BHCs, w i th

a f u r t h e r d i s t i n c t i o n m a d e f o r t h e t yp e o f l o a n f ac i li t y a n d a mo u n t f u n d e d . Lo ss r at e s w e r e co m p o se d o f

a sh o ck t o t h e f u n d e d p o r t i o n n e t o f ma r ke t - va lu e a d j u s t m e n t s , a n d a sh o ck t o t h e r e m a i n in g u n f u n d e d

p o r t i o n .

The approach used to p ro jec t s t ress l osses fo r commerc ia l rea l es ta te and re ta i l l oans he ld under

FVO and HFS accoun t ing s tandard s segm ent ed expo sures by m a jo r t ype o f l oan (e .g. , res iden t ia l

mor tgages, s tuden t l oans, c red i t ca rds, and the ma jo r ca tegor ies o f commerc ia l rea l es ta te l oans) and by

loan v in t age (year o f o r i g ina t i on ) . Shocks cons is ten t w i th th e g loba l f i nanc ia l m arke t shock wer e app l i ed

based on v in t age and loan characte r i s t i cs such as ca r ry va lues and co l l a te ra l , w her e these fac to r s a re

app l i cab le . Res iden t ia l mor tgage loans under fo rw ard con t r ac t w i th the GSEs w ere genera l l y exc luded .

M ort gage Repurchase Losses

Est ima tes o f mor tgage repurchase losses fo r l oans so ld w i th rep resen ta t i ons and war ran t i es

l i ab i l i t y a re based on in fo rmat ion p rov ided by the BHCs abou t the r i sk characte r i s t i cs o f l oans so ld to the



GSEs, in to p r i va te l abe l secur i t i es , and as w ho le l oans. The in fo rm at ion i nc ludes th e l oan v in t age ,

o r ig ina l and cu r ren t unpa id ba lances, l osses recogn ized to da te , and cu r ren t payment s ta tus , among

o t her m easures. The m ode l used to p ro jec t m or t gage repu rchase losses i nvo lves t w o steps. The f i r st

s tep i s to es t im a te cred i t l osses fo r t he overa l l p opu la t i on o f each BHC's so ld l oans w i th ou t s tand in g

represen ta t i ons and war ran t i es l i ab i l i t y . Th i s s tep i nvo lves p ro jec t i ng fu tu re l osses over the rema in ing

l i fe t im e o f the l oans as w e l l as tak in g accoun t o f l osses recogn ized to da t e . The second s tep i s th en to

p r o j e c t h o w m u ch o f t h i s c r e d it l o ss ma y b e u l t i ma t e l y p u t b a ck t o t h e sel l in g B HC ( wh e t h e r t h r o u g h

con t rac tua l repurchase , a se t t l emen t ag reement , o r l i t i ga t i on l oss) .

Cred i t l osses a re p ro jec ted under the home p r i ce assumpt ions o f the Superv i so ry S t ress Scenar io

by us ing i ndust ry-w ide i n fo rmat ion to mode l c red i t l osses on va r ious g roups o f mor tgage loans (e .g . ,

g rou ped by v in tage and investo r t yp e ) . These cred i t l oss ra tes w ere then ad jus ted b y th e cred i t

pe r fo rmance o f l oans so ld by each BHC and mapped back to the ba lances o f the co r respond ing g roups

o f l oans repor t ed by each BHC.

The share o f c red i t l osses l i kel y to be u l t im a te l y p u t back to the se l l i ng BHCs is a d i f f i cu l t f i gu re

to p r o jec t , since h i sto r i cal i n fo rm at ion p ro v ides on ly l im i t ed gu idance . Each investo r t y pe i s eva lua ted

sep a r a t e l y t o d e t e r m i n e t h e a m o u n t o f p a st a n d f u t u r e c r e d i t l o sse s t h a t a r e l ike ly t o b e p u t b a ck ,

co n s id e r i n g f o r e a ch i n ve st o r t yp e b o t h i n ve st o r b e h a v i o r t o d a t e a n d t h e p r o ce d u r a l m e ch a n i cs o f

pu r su ing repur chase cla ims. Fo r w ho le l oans and loans so ld i n to p r i va te l abe l secur i t i es, th e " pu t -back

ra te , " w h ich est im a tes the am oun t o f ne t c red i t l osses l ike l y to be pu t back to the se l l ing BHC, is

e s t i ma t e d b a se d o n i n f o r m a t i o n f r o m r e ce n t se t t l e m e n t a c t i v i t i e s i n t h e b a n k i n g in d u s t r y , i n co r p o r a t i n g

ad justm en t s fo r superv i so ry assessmen ts o f BHC-spec i f i c r i sk . Fo r l oans so ld to t he GSEs, th e p ro jec t ed

pu t -back ra te i s based on h i s to r i ca l i n fo r m at ion on r epur chases o f l oans so ld to th e GSEs.

The p ro jec t i ons assume tha t a ma jo r i t y bu t no t a l l o f the mor tgage repurchase losses p ro jec ted

us ing th ese tech n iqu es a re rea l ized over the n ine quar te r s o f th e s t ress scenar io ho r i zon , w i th t he l o sses

d iv ided equa l l y across quar te rs and inco rpora ted i n to the PPNR pro jec t i ons. Th is assumpt ion a t tempts

to ba lance the recogn i t i on tha t the reso lu t i on o f repurchase i ssues cou ld be a l eng thy p rocess aga ins t

the des i re to ensure tha t the s t ress scenar io p ro jec t i ons i nco rpora te a conserva t i ve assessment o f the

losses to w h ich th e BHCs cou ld b e exposed over t he s t ress scenar io ho r i zon .

B3. Pre-provision Net Revenue

In der iv ing pro ject ions of PPNR for each BHC under the Supervisory Stress Scenar io , the Federa l

Reserve l eve raged mu l t i p le sources o f da ta and in fo rmat ion . These inc lude h i s to r i ca l and p ro jec ted da ta



repor t ed by the BHCs on va r ious regu lato ry r epor ts , suppo r t ing m ate r ia ls p rov ided by BHCs w i th t he

capi ta l p lans they submit ted for CCAR 2012, BHC in ternal management reports such as stra teg ic p lans,

budgets and board of d i rectors reports such as asset and l iab i l i ty committee packages, publ ic ly avai lab le

in fo r m at ion such as f inanc ia l s ta tem ent s and equ i ty ana lys t repor t s, and the ou tp u t o f tw o econom etr ic

models that generate PPNR pro ject ions for the banking sector in aggregate as wel l as for speci f ic BHCs.

The key inpu ts to t he p ro cess are the PPNR pro jec t ions and suppo r t ing m ate r ia l p rov ided by the

BHCs in the ir CCAR 2012 capi ta l p lans. Each BHC's PPNR pro ject io ns w ere subject t o in t ensive review by

Federa l Reserve staf f ; the submissions and the ir underly ing assumptions were assessed for consistency

with the Supervisory Stress Scenario and reasonableness re la t ive to h istor ica l rea l izat ions based on

em p i r i ca l ana lysis and superv iso ry know ledge o f each BHC's revenue d r ive rs and the sensi t i v i ty o f t hose

dr ive rs to va r ious m acroeconom ic facto rs and th e bus iness env i ronm ent . In add i t ion t o assessing each

BHC's pro ject ions ind iv idual ly, sta f f conducted horizonta l analysis across key PPNR components (e .g. ,

ne t in te res t income, non- in te res t expenses, non- t rad ing non- in te res t income, and compensa t ion

expenses), across business l ines (e.g. , investment banking, investment servic ing, investment

m anagem ent , comm ercia l banking and ret a i l banking), and across peer grou pings (e.g., nat io nal BHCs,

reg ional BHCs, special ty BHCs). Teams of specia lists cond uct ed assessmen ts and prod uced indep ende nt

pro ject ions of speci f ic e lements of PPNR, such as OREO expenses, mortgage put-backs resul t ing from

represen ta t ions and warran t ies on mor tgages tha t had been p rev ious ly o r ig ina ted and so ld to th i rd

par t ies , and losses f ro m opera t iona l r i sk even ts . Two econo m etr ic mo de ls w ere a lso deve loped to

p ro jec t t he com pon en ts o f PPNR using h isto r ical r egu lato r y repor t (FR Y-9C) data and m acroeconom ic

var iab les. The regu la to ry repor t da ta has th e advan tage o f cover ing a re la t i ve ly long h isto r ical pe r iod

and thus being able to capture changes in PPNR and i ts components over severa l business cycles, but i t

lacks the deta i l o f the BHC-speci f ic data co l lected for CCAR 2012 (which has a much shorter h istory).

Thus, th e econom etr ic mo de ls w ere p r im ar i l y used to benchm ark the es t ima t es based on th e BHCs'

p ro jec t ions.

In the f ina l stage of the process, the BHCs' PPNR pro ject ions were adjusted by the Federa l

Reserve wherever the p ro jec t ions lacked su f f i c ien t suppor t o r were deemed incons is ten t w i th the

Supervisory Stress Scenario . These adjustments were made by modi fy ing key assumptions (e.g. new

serv ice fees, expense reduct ions, ra te p rem ia ) to genera t e p r o jec t ions tha t a re cons isten t w i th each

BHC's port fo l ios and business act iv i t ies, whi le mutual ly consistent across BHCs and consistent wi th the

Super visory Str ess Scenario . In addi t ion, the ind epen dent pro ject ion s m ade by t he Federa l Reserve for



cer ta in e lem ent s o f PPNR - OREO expenses, mo r t gage repur chase and pu t -back costs , and losses re lated

to opera t i ona l r i sk even ts - were subst i tu ted fo r va lues o f these e lements p ro jec ted by the BHCs.

B4. Equit y Capit al and Regulat ory Capit al

The mode ls descr ibed above p roduce p ro jec t i ons o f revenues, expenses, l osses, and p rov i s ions

tha t genera te es t ima tes o f p re - tax ne t i ncome fo r each BHC under the Superv i so ry S t ress Scenar io .

A f t e r - t ax ne t i ncom e i s ca l cu la ted by app ly ing a cons is ten t t ax ra te to p re - tax ne t i ncom e fo r a l l BHCs.

Af t e r - t ax ne t i nco m e and the p lanned cap i ta l ac t i ons i n th e BHCs' CCAR 2012 cap i ta l p lans a re the

pr im ary d r i ve rs o f changes in equ i t y cap i ta l . In pa r t i cu la r , t he change in equ i t y cap i ta l each quar te r

r e f l e ct s p r o j e c t e d a f t e r - t a x n e t i n co m e f o r t h a t q u a r t e r m i n u s ca p i t a l d is t r i b u t i o n s ( d i v id e n d s ,

repurchases and any o the r ac t i ons tha t d i sperse equ i t y ) p lus any i ssuance o r o the r co rpora te ac t i ons

t h a t i n c r e a se e q u i t y .

[ foo tnote ] 31 These s teps inc lude sa les o f bus inesses o r por t fo l ios inc luded in the BHCs ' cap i ta l p lans . [endo f foo tno te . ]

As no ted above , these cap i ta l ac t i ons a re the d i v idend payments , sharerepu rchases, and share i ssuance p lanned by each BHC und er i t s ow n b ase l i ne scenar io and t hus do no t

r e f l e ct a d j u s t m e n t s t h a t B HCs m i g h t m a ke t o t h e i r ca p i t a l d i st r i b u t i o n s u n d e r s t r e sse d m a c r o e co n o m i c

co n d i t i o n s o r i n r e sp o n se t o ch a n ge s in t h e i r o w n f i n a n c ia l co n d i t i o n a n d p e r f o r m a n ce .

Pro jec ted changes in equ i t y cap i ta l in tu rn d r i ve changes in regu la to ry cap i ta l m easures. These

regu la to ry cap i ta l measures a re ca l cu la ted tak ing accoun t o f deduct ions i n the i r cap i ta l p lans and

cons is ten t w i th cu r ren t U.S . regu la to ry cap i ta l ru les tha t l im i t o r e l imina te the recogn i t i on o f ce r ta in

in t angib le asset s and un real ized gains and losses in t ier 1 capi t a l . These dedu ct io ns are app l ied u sing

conserva t i ve and cons isten t assum pt ions across th e 19 BHCs. For i nstance , i n de t e rm in ing th e

d i sal l o we d p o r t i o n o f t h e d e f e r r e d t a x a sset ( a n o f f set t o f u t u r e t a x p a ym e n t s a r i si n g f r o m n e t l o ss

ca r r yo ve r s i n t o f u t u r e ye a r s) , t h e p r o j e c t i o n s u se a co m m o n t a x r a t e a n d me t h o d t o e s t i m a t e f u t u r e

t a xa b l e i n co me . Re g u la t o r y ca p i t a l me a su r e s a l so i n co r p o r a t e t h e i m p a c t o f o t h e r co m p r e h e n s i ve

incom e, as p ro jec ted by th e BHCs in th e i r cap i ta l p lans and app ly ing the app l i cab le l imi t s i n cu r ren t U.S.

regu la to ry cap i ta l ru les .

Re g u l at o r y cap i t a l p r o j e c t i o n s we r e n o t a d j u s t e d t o t a ke a cco u n t o f a n y d i f f e r e n ce s b e t w e e n

pro jec ted and actua l pe r fo rmance by the BHCs dur ing Q4 2011 and Q1 2012 , du r ing the t ime the s t ress

scenar io resu l t s w ere b e ing p rod uced . In cases w here , fo r i ns tance , th e BHCs had rea l i zed ga ins o r

losses on acqu is i t i ons o r d i vest i t u res i nc luded in a BHC's cap i ta l p lan bu t com p le t ed a f t e r the p lan w as



deve loped , o r in wh ich ne t income was s ign i f i can t ly d i f fe ren t than wha t was p ro jec ted under the

Supervisory Stress Scenario , these d i f ferences are not recognized in the stressed capi ta l pro ject ions.

Capi ta l ra t ios are ca lcu lated using to ta l assets and r isk-weighted assets based on pro ject ions

m ade by the BHCs as part o f th e i r CCAR 2012 capi ta l p lan subm issions u nder t he Super visory Str ess

Scenario . These pro ject ions are ad justed to account for d i f ferences between BHC and Federa l Reserve

pro jec t ion s o f ce r ta in ba lance shee t i tems, such as th e ALLL and th e d isa llow ed p or t ion o f t he d e fe r red

tax asset.



Ap p e n d i x C

BHC-Spe cifi c Resul t s



Comprehen s i ve Cap i t a l Ana l ys i s and Rev iew 2012

Table C.1: Federa l Reserve Est imates in the Superv isory St ress Scenar io

Ally Financial Inc.

These project ion s represent h ypoth et ical est imat es tha t involve an econom ic out come that is mor e adverse th an expected. These est imat es are not

f orecasts o f expected losses, revenues, net income before taxes or cap i ta l ra t i os . The two m in imum capi ta l ra t i os presented be low are for t he per iod

Q4 2011 through Q4 2013 and do not necessar i ly occur i n the same quarter .

The Feder a l Reser ve m ade changes t o t h i s t ab l e on M ar ch 16 , 2012 , t o co r r ec t com pu t a t i on e r r o r s f o r som e l oss r a t es and l eve l s .

The co r r ec t i ons do no t i m pac t o t he r f i gu r es , inc l ud i ng cap i t a l r a t i os .

Pro jec ted Cap i t a l Ra t i os t h rough Q 4 2013

Unde r t he Hypo t he t i ca l Supe rv i so r y S t ress Scena r i o

Ac t ua l

Q3 2011

St ressed ra t ios w i t hall

p r o p o s e d capi ta l act ion

t h r o u g h Q4 2013

Q4 2013

Stressed rat ios with al l

proposed capi ta l act ion

through Q4 2013

M i n i m u m

St r essed r a t i os assum i ng no

cap i t a l ac t i ons

a f t e r Q1 2012 [see f oo t no t e ] ( 1 )

M i n i m u m

Tier 1 Com mo n Capi ta l Rat io (%) 8.0 4.4 2.5 2.5

Tier 1 Capi ta l Rat io (%) 14.3 6.4 6.4 6.4

Total Risk-Based Capi ta l Rat io (%) 15.5 7.1 7.1 7.1

Tier 1 Leverage Rat io (%) 11.6 5.2 5.2 5.2

Pro jec ted Losses, Revenue and Ne t I ncom e be fo re Taxes f o r Q4 2011 t h rou gh Q4 2013


Bi l l i ons of

Dol lars

Per cen t o f Ave r age

Asse t s

Pr e - Pr ov i s i on Ne t Revenue[see f oo t no t e ] ( 2 ) -5.1 -2.7

O t he r Revenue[see f oo t no t e ] ( 3 ) 0. 2

less

Pr ov i s i ons 3. 1

less Real i zed Losses/Gains on Secur i t ies (AFS/H TM )0. 9

l ess T r ad i ng and Coun t e r p a r t y Losses[see f oo t no t e ] ( 4 )0. 0

less Oth er Losses/Gains [see f oo t no t e ] ( 5 )0. 9

equals

Net I ncom e be f o r e Taxes - 9 . 8 - 5 . 2

Pro jec ted Loan Losses by Type o f Loans f o r Q4 2011 t h r ough Q4 2013


Bi l l i ons of

Dol lars

Por t fo l io Loss Rates(%)

Loan Losses[see f oo t no t e ] ( 6 ) 3. 6 3. 3

Fi rst L ien M or t gages, Dom est ic 0.4 6.0

Junior L iens and HELOCs, Domest ic 0. 7 21.1

Com m er c i a l and I ndus t r i a l 0 . 5 1 . 6

Com m er c i a l Real Es t a t e , Dom es t i c 0. 1 2.3

Credi t Cards 0.0 0.0

O t h e r C o n s u m e r 2. 0 3. 0

Oth er Loans 0.0 2.5

[ f oo t no t e ] ( 1 ) Assum es p l anned cap i t a l ac t i ons t h r ough Q1 2012 , bu t assum i ng no m a t e r i a l cap i t a l i ssuances f r om M ar ch 16 t h r ough M ar ch 31 , 2012 .[endof f oo t no t e1. ]

[ f oo t no t e ] ( 2 ) Pr e - Pr ov i s i on Ne t Revenue i nc l udes l osses f r om oper a t i ona l r i sk even t s , m or t gage pu t - back expenses , and OREO cos t s .[endof f oo t no t e2. ]

[ f oo t no t e ] ( 3 ) Ot her Revenue i nc l udes one t i m e i ncom e and ( expense) i t em s no t i nc l uded i n P r e - P r ov i s i on Ne t Revenue .[endof f oo t no t e3. ][ f oo t no t e ] ( 4 ) Tr ad i ng and Coun t e r pa r t y i n c l udes m ar k - t o - m ar ke t l osses , changes i n cr ed i t va l ua t i on ad j us t m en t s ( CVA) and i nc r em en t a l de f au l t l osses .[endof f oo t no t e4. ]

[ f oo t no t e ] ( 5 ) Ot her Losses / Ga i ns i nc l udes p r o j ec t ed ch ange i n f a i r va l ue o f l oans he l d f o r sal e and l oans he l d f o r i nves t m en t m easur ed u nder t h e f a i r va l ue

op t i on , and goodw i l l i m pa i r m en t cha r ges . [endof f oo t no t e5.]

[ f oo t no t e ] ( 6 ) Com m er c i a l and i ndus t r i a l l oans i nc l ude sm a l l and m ed i um en t e r p r i se l oans and co r po r a t e ca r ds. O t he r l oans i nc l ude i n t e r na t i ona l r ea l es t a t e

l oans . Ave r age l oan ba l ances used t o ca l cu l a t e po r t f o l i o l oss r a t es exc l ude l oans he l d f o r sa l e and l oans he l d f o r i nves t m en t un der t he f a i r va l ue

o p t i o n .[endof f oo t no t e6. ]

No t es : The t wo m i n i m um cap i t a l r a t i os p r esen t ed he r e a r e f o r t he pe r i od Q4 2011 t h r ough Q4 2013 and do no t necessa r i l y occu r i n t he sam e

quar t e r . Cap i t a l ac t i ons i nc l ude com m on d i v i dends , com m on shar e r epu r chases , and com m on shar e i ssuance . Ave r age ba l ances used f o r

p r o f i t ab l i t y r a t i os and po r t f o l i o l oss r at es a r e ave r ages ove r t he n i ne - quar t e r pe r i od . Est i m a t es m ay no t sum p r ec i se l y due t o r ou nd i ng .

Source: Federal Reserve est imates in the Supervisory St ress scenar io.





American Express Company




Pro jec ted Cap i t a l Ra t i os t h rough Q 4 2013Unde r t he Hypo t he t i ca l Supe rv i so r y S t ress Scena r i o

Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m






Unde r t h e Hypo t he t i ca l Supe rv i so r y S t ress Scena r i o

Bi l l i ons of

Dol lars


Asse t s

Pr e - Pr ov i s i on Ne t Revenue[see f oo t no t e ] ( 2 ) 16.0 12.2


less





equals

Net I ncom e be f o r e Taxes 6 . 3 4 . 8



Bi l l i ons of

Dol lars

Por t fo l io Loss Rates

(%)



Junior L iens and HELOCs, Domest ic 0 .0 0. 0


Com m er c i a l Real Es t a t e , Dom es t i c 0. 0 0. 0


O t h e r C o n s u m e r 0. 2 10.1

O t he r Loans 0 . 0 0 . 0

[ f oo t no t e ] ( 1 ) Assum es p l anned cap i t a l ac t i ons t h r o ugh Q1 2012 , bu t assum i ng no m a t e r i a l cap i t a l i ssuances f r om M ar ch

[ f oo t no t e ] ( 2 ) P r e - Pr ov i s i on Ne t Revenue i nc l udes l osses f r om oper a t i ona l r i sk even t s , m o r t gage pu t - back expenses , and

[ f oo t no t e ] ( 3 ) O t he r Revenue i nc l udes one t i m e i ncom e and ( expense) i t em s no t i nc l uded i n P r e - Pr ov i s i on Ne t Revenue .[

[ f oo t no t e ] ( 4 ) T r ad i ng and Coun t e r p a r t y i nc l udes m ar k - t o - m ar ke t l osses , changes i n c r ed i t va l ua t i on ad j us t m en t s ( CVA) a[ f oo t no t e ] ( 5 ) O t he r Losses / Ga i ns i nc l udes p r o j ec t ed change i n f a i r va l ue o f l oans he l d f o r sa l e and l oans he l d f o r i nves t m


[ f oo t no t e ] ( 6 ) Com m er c i a l and i ndus t r i a l l oans i nc l ude sm a l l and m ed i um en t e r p r i se l oans and co r po r a t e ca r ds . O t he r l o






Sour ce : Feder a l Reser ve es t i m a t es i n t he Super v i so r y S t r ess scenar i o .





Bank o f Ameri ca Corporat ion








Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s


O t he r Revenue[see f oo t no t e ] ( 3 ) 4 .0

less

Pr ov i s i ons 59 . 7

Real i zed Losses/Gains on Secur i t ies (AFS/H TM ) 1.2

T r ad i ng and Coun t e r pa r t y Losses[see f oo t no t e ] ( 4 ) 21.1

O t he r Losses / Ga i ns[see f oo t no t e ] ( 5 ) 13.4

equals




Bi l l i ons of

Do l l a r s


(%)

Loan Losses[see f oo t no t e ] ( 6 ) 70 . 1 8. 3


Junior L iens and HELOCs, Domest ic 16.0 15.0


Com m er c i a l Real Es t a t e , Dom e s t i c 3. 9 6. 4


O t h e r C o n s u m e r 4 .0 5. 6




[ f oo t no t e ] ( 3 ) O t he r Revenue i nc l udes one t i m e i ncom e and ( expense) i t em s no t i nc l uded i n P r e - Pr ov i s i on Ne t Revenue .[[ f oo t no t e ] ( 4 ) T r ad i ng and Coun t e r p a r t y i nc l udes m ar k - t o - m ar ke t l osses , changes i n c r ed i t va l ua t i on ad j us t m en t s ( CVA) a

[ f oo t no t e ] ( 5 ) O t he r Losses / Ga i ns i nc l udes p r o j ec t ed change i n f a i r va l ue o f l oans he l d f o r sa l e and l oans he l d f o r i nves t m













The Bank o f New York Mel lon Corporat ion





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less

Pr ov i s i ons 1.1




equals




Bi l l i ons of

Do l l a r s


(%)

Loan Losses[see f oo t no t e ] ( 6 ) 1.2 2. 6

F i r st L ien M or t gages , Dom es t i c 0 . 4 7 . 7

Junior L iens and HELOCs, Domest ic 0 .0 12.6




O t h e r C o n s u m e r 0 .0 1. 2


[ f oo t no t e ] ( 1 ) Assum es p l anned cap i t a l ac t i ons t h r o ugh Q1 2012 , bu t assum i ng no m a t e r i a l cap i t a l i ssuances f r om M ar ch 16 t h r o ugh M ar c

[ f oo t no t e ] ( 2 ) P r e - Pr ov i s i on Ne t Revenue i nc l udes l osses f r om oper a t i ona l r i sk even t s , m o r t gage pu t - back expenses , and OREO cos t s .[endo

[ f oo t no t e ] ( 3 ) O t he r Revenue i nc l udes one t i m e i ncom e and ( expense) i t em s no t i nc l uded i n P r e - Pr ov i s i on Ne t Revenue .[endof f oo t no t e3.]

[ f oo t no t e ] ( 4 ) T r ad i ng and Coun t e r p a r t y i nc l udes m ar k - t o - m ar ke t l osses , changes i n c r ed i t va l ua t i on ad j us t m en t s ( CVA) and i nc r em en t a l d[ f oo t no t e ] ( 5 ) O t he r Losses/ Ga i ns i nc l udes p r o j ec t ed change i n f a i r va l ue o f l oans he l d f o r sa l e and l oans he l d f o r i nves t m en t m easur ed un


[ f oo t no t e ] ( 6 ) Com m er c i a l and i ndus t r i a l l oans i nc l ude sm a l l and m ed i um en t e r p r i se l oans and co r po r a t e ca r ds . O t he r l oans i nc l ude i n t e r n











BB&T Corporat ion





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less





equals




Bi l l i ons of

Do l l a r s


(%)





Com m er c i a l Real Es t a t e , Dom e s t i c 1.8 5. 6


O t h e r C o n s u m e r 0. 7 5 .6


[ f oo t no t e ] ( 1 ) Assum es p l anned ca

[ footnote] (2) Pre-Provis ion Net R

[ f oo t no t e ] ( 3 ) O t he r Revenue i nc l

[ f oo t no t e ] ( 4 ) T r ad i ng and Coun t e[ footnote] (5) Oth er Losses/Gains


[ f oo t no t e ] ( 6 ) Com m er c i a l and i nd











Capital One Financial Corporat io n





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less

Pr ov i s i ons 22.3

Real i zed Losses/Gains on Secur i t ies (AFS/H TM ) 0.3

T r ad i ng and Coun t e r pa r t y Losses[see f oo t no t e ] ( 4 ) 0. 0

O t he r Losses / Ga i ns[see f oo t no t e ] ( 5 ) 0. 0

equals




Bi l l i ons of

Do l l a r s


(%)

Loan Losses[see f oo t no t e ] ( 6 ) 19.0 11.4



Com m er c i a l and I ndus t r i a l 1 .3 8 . 2



O t h e r C o n s u m e r 1. 6 9. 8


















Cit igroup Inc.








Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less



l ess T r ad i ng and Coun t e r p a r t y Losses[see f oo t no t e ] ( 4 )20.9


equals

Net I ncom e be f o r e Taxes -50.3 -2.8



Bi l l i ons of

Do l l a r s


(%)

Loan Losses[see f oo t no t e ] ( 6 ) 67 . 0 11.3






O t h e r C o n s u m e r 8. 1 23.4




[ f oo t no t e ] ( 3 ) O t he r Revenue i nc l udes one t i m e i ncom e and ( expense) i t em s no t i nc l uded i n P r e - Pr ov i s i on Ne t Revenue .[endof f oo t no t e3.][ f oo t no t e ] ( 4 ) T r ad i ng and Coun t e r p a r t y i nc l udes m ar k - t o - m ar ke t l osses , changes i n c r ed i t va l ua t i on ad j us t m en t s ( CVA) and i nc r em en t a l d

[ f oo t no t e ] ( 5 ) O t he r Losses/ Ga i ns i nc l udes p r o j ec t ed change i n f a i r va l ue o f l oans he l d f o r sa l e and l oans he l d f o r i nves t m en t m easur ed un













Fif th Third Bancorp





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less





equals




Bi l l i ons of

Do l l a r s


(%)





Com m er c i a l Real Es t a t e , Dom e s t i c 1. 4 11.3


O t h e r C o n s u m e r 0. 2 1. 8


















The Goldman Sachs Group, Inc.





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Dol lars


Asse t s



less





equals




Bi l l i ons of

Dol lars


(%)





Com m er c i a l Real Es t a t e , Dom es t i c 0. 0 4. 1


O t h e r C o n s u m e r 0 .0 3. 7


















JPM organ Chase & Co.





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less




less Oth er Losses/Gains [see f oo t no t e ] ( 5 )1.7

equals




Bi l l i ons of

Do l l a r s


(%)

Loan Losses[see f oo t no t e ] ( 6 ) 55 . 8 8. 1

F i r st L ien M or t gages , Dom es t i c 7 . 0 6.3





O t h e r C o n s u m e r 2. 1 3. 6


















Keycorp





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less

Pr ov i s i ons 4 .0




equals




Bi l l i ons of

Do l l a r s


(%)



Junior L iens and HELOCs, Domest ic 0. 7 7. 8




O t h e r C o n s u m e r 0. 3 7. 3


[ f oo t no t e ] ( 1 ) Assum es p l anned cap i t a l ac t i ons t h r o ugh Q1 2012 , bu t assum i ng no m a t e r i a l cap i t a l i ssua

[ f oo t no t e ] ( 2 ) P r e - Pr ov i s i on Ne t Revenue i nc l udes l osses f r om oper a t i o na l r i sk even t s , m o r t gage pu t - ba

[ f oo t no t e ] ( 3 ) O t he r Revenue i nc l udes one t i m e i ncom e and ( expense) i t em s no t i nc l uded i n P r e - Pr ov i s

[ f oo t no t e ] ( 4 ) T r ad i ng and Coun t e r pa r t y i nc l udes m ar k - t o - m ar k e t l osses , changes i n c r ed i t va l ua t i on ad[ f oo t no t e ] ( 5 ) O t he r Losses / Ga i ns i nc l udes p r o j ec t ed change i n f a i r va l ue o f l oans he l d f o r sa l e and l oan


[ f oo t no t e ] ( 6 ) Com m er c i a l and i ndus t r i a l l oans i nc l ude sm a l l and m ed i um en t e r p r i se l oans and co r po r a t











M etLi fe, Inc.








Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less


less Real i zed Losses/Gains on Secur i t ies (AFS/H TM )11.5



equals




Bi l l i ons of

Do l l a r s


(%)

Loan Losses[see f oo t no t e ] ( 6 ) 0. 9 1.4




Com m er c i a l Real Es t a t e , Dom e s t i c 0. 4 1.3


O t h e r C o n s u m e r 0. 0 0. 0




[ f oo t no t e ] ( 3 ) O t he r Revenue i nc l udes one t i m e i ncom e and ( expense) i t em s no t i nc l uded i n P r e - Pr ov i s i on Ne t Revenue .[endof f oo t no t e3.][ f oo t no t e ] ( 4 ) T r ad i ng and Coun t e r p a r t y i nc l udes m ar k - t o - m ar ke t l osses , changes i n c r ed i t va l ua t i on ad j us t m en t s ( CVA) and i nc r em en t a l d

[ f oo t no t e ] ( 5 ) O t he r Losses/ Ga i ns i nc l udes p r o j ec t ed change i n f a i r va l ue o f l oans he l d f o r sa l e and l oans he l d f o r i nves t m en t m easur ed un













M organ Stan ley





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s


O t he r Revenue[see f oo t no t e ] ( 3 ) -1.8

less





equals




Bi l l i ons of

Do l l a r s


(%)





Com m er c i a l Real Es t a t e , Dom e s t i c 0. 0 4 .0


O t h e r C o n s u m e r 0. 1 1. 2


















The PNC Financia l Services Gro up, In c.





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less


less Real i zed Losses/Gains on Secur i t ies (AFS/H TM )1.2



equals




Bi l l i ons of

Do l l a r s


(%)







O t h e r C o n s u m e r 0 .6 3. 4


















Regions Financial Corporat ion





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Dol lars


Asse t s



less





equals




Bi l l i ons of

Dol lars


(%)





Com m er c i a l Real Es t a t e , Dom es t i c 1.9 9. 2


O t h e r C o n s u m e r 0. 2 5. 3


















State Street Corporat io n





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Dol lars


Asse t s



less





equals




Bi l l i ons of

Dol lars


(%)





Com m er c i a l Real Es t a t e , Dom es t i c 0. 1 20.1


O t h e r C o n s u m e r 0 .0 0 .0




















U.S. Bancorp





Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less





equals




Bi l l i ons of

Do l l a r s


(%)







O t h e r C o n s u m e r 0. 9 3. 3


















Wel l s Fargo & Company








Ac t ua l

Q3 2011Q4 2013



through Q4 2013

M i n i m u m




M i n i m u m







Bi l l i ons of

Do l l a r s


Asse t s



less




less Oth er Losses/Gains [see f oo t no t e ] ( 5 )1.7

equals




Bi l l i ons of

Do l l a r s


(%)



Junior L iens and HELOCs, Domest ic 13.7 13.8




O t h e r C o n s u m e r 4. 2 5. 1


[ f oo t no t e ] ( 1 ) Assum es p l anned cap i t a l ac t i ons t h r o ugh Q1 2012 bu t assum i ng no m at e r i a l cap i t a l i ssua

Documents

CCAR - Methodology and Result