Capital and CCAR Reformulation
In concert with a proposal to revise the enhanced supplementary leverage ratio (eSLR), the Federal Reserve has proposed a significant rewrite of its capital rules in relation to its CCAR stress testing regime governing BHCs with assets above $50 billion and certain IHCs. Interacting with prior changes to the qualitative approach to CCAR, the GSIB surcharge, and other pending stress-test changes, the new approach to the risk-based capital framework, eSLR, and CCAR are intended to rebalance the U.S. big-bank capital framework so that risk-based capital (RBC), not the leverage ratio (LR), is the binding constraint for the majority of large BHCs.