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  • US Federal Reserve Board Provides Updated CCAR and DFAST Questions and Answers

    03/09/2018

    The U.S. Board of Governors of the Federal Reserve System published updates to its Comprehensive Capital and Analysis Review and Dodd-Frank Act Stress Tests questions and answers guide.  The Federal Reserve Board provided additional questions and answers with respect to a number of topics, including general CCAR considerations, range of practice and supervisory expectations, FR Y 14-A report supporting documentation and the remediation of supervisory findings.  Specifically, the updated Federal Reserve Board guidance addresses the treatment of the base erosion and anti-abuse tax (BEAT), and other aspects of the 2017 Tax Cut and Jobs Act.  The question posed with respect to this topic expressed concern that the BEAT provisions, as drafted, appear to contain a number of perceived inconsistencies and uncertainties, which could potentially lead to inconsistent interpretations across financial institutions.  The Federal Reserve Board references its March 2, 2018 letter that describes enhancements to the supervisory models for DFAST 2018, including that the models have not been adjusted to account for the BEAT.  With respect to CCAR, the Federal Reserve Board references its 2018 instructions, which note that financial institutions must account for the impact of the TCJA in regulatory reports, financial statements and CCAR projections.  The Federal Reserve Board noted that the U.S. Department of the Treasury intends to issue clarifying guidance on the implementation of certain provisions of the TCJA, but that regardless, financial institutions should reflect the TCJA in their CCAR projections on a “best efforts” basis, and highlight the effect that these uncertainties had on their projections in their respective capital plans.  The Federal Reserve Board did note, however, that the first day letter, circulated on February 14, 2018, to members of the Large Institution Supervision Coordinating Committee and large and complex firms did not contemplate tax modeling within its areas of scope.

    View the full CCAR and DFAST questions and answer guide.