WASHINGTON (MNI) – The Federal Reserve announced Friday that it
will seek input on a proposal to require large finanancial institutions
to submit annual capital plans for review, which in some cases, if the
plans are rejected, would require Fed approval for capital distribution.

The text of the statement follows:

The Federal Reserve Board is seeking comment on a proposal to
require top-tier U.S. bank holding companies with total consolidated
assets of $50 billion or greater to submit annual capital plans for
review.

The aim of the capital plan review, which builds on the
Comprehensive Capital Analysis and Review (CCAR) conducted earlier this
year, is to ensure that institutions have robust, forward-looking
capital planning processes that account for their unique risks and that
permit continued operations during times of economic and financial
stress. Institutions would be expected to have credible plans to have
sufficient capital so that they can continue to lend to households and
businesses, even under adverse conditions. Boards of directors of the
institutions would be required each year to review and approve capital
plans before submitting them to the Federal Reserve.

The Federal Reserve would evaluate institutions’ plans to make
capital distributions, such as increasing dividend payments or
repurchasing or redeeming stock, as part of the capital plan reviews. In
some cases, such as when institutions’ capital plans have been rejected
by the Federal Reserve, firms would be required to receive approval from
the Federal Reserve before making capital distributions.

The proposal would institutionalize the recently completed CCAR
exercise. The CCAR involved a forward-looking analysis of the capital
plans at the 19 largest U.S. bank holding companies. The CCAR followed
the Supervisory Capital Assessment Program (SCAP), a standardized stress
test led by the Federal Reserve in 2009.

As of March 31, the most recent available data, 35 U.S. bank
holding companies had assets of at least $50 billion. According to the
proposal, the level of detail and analysis expected in each
institution’s capital plan would vary based on the company’s size,
complexity, risk profile, and scope of operations. The Federal Reserve
plans to finalize the proposal later this year and to begin the annual
capital plan reviews in early 2012.

The proposed capital plans would complement a number of components
of the Dodd- Frank Wall Street Reform and Consumer Protection Act,
including the development of enhanced prudential standards for large
firms and required stress tests. As the Federal Reserve implements the
Dodd-Frank Act, it is expected that the company-run Dodd-Frank stress
tests will serve as one component of institutions’ capital plans.

The Federal Reserve requests comments on the capital plan review
proposal, which will be published soon in the Federal Register, by
August 5, 2011.

** Market News International Washington Bureau: 202-371-2121 **

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