FRM Exam Part II · Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice

Supervisory Expectations for Capital Planning (CCAR)

Updated 11 October 2026 · Fact-checked

CCAR is the Federal Reserve's annual review of capital planning at large US bank holding companies. Under the capital plan rule (Regulation Y, 12 CFR 225.8), a firm must show it can stay above minimum capital ratios under stress. To answer questions, match each weakness or practice to one of the five themes in this guide's study framework.

Understand Supervisory Expectations for Capital Planning (CCAR)

Capital planning is how a bank decides how much capital it needs, what it will hold, and how much it can return to shareholders through dividends and buybacks. The Federal Reserve cares because a bank that pays out too much before a downturn can fail when losses arrive.

The Comprehensive Capital Analysis and Review (CCAR) is the Fed's supervisory process for large US bank holding companies. It was introduced after the 2007-2009 crisis. The legal basis is the capital plan rule in Regulation Y, 12 CFR 225.8. The rule requires large bank holding companies to submit a capital plan to the Fed every year.

A capital plan covers a planning horizon of at least nine quarters, beginning with the fourth quarter of the calendar year before the submission year. It includes an assessment of expected uses and sources of capital, and estimates of revenue, losses, reserves and pro forma capital levels under expected conditions and under stress. It also covers planned capital actions such as dividends, repurchases and issuance, and a description of the firm's capital policy and process. The Fed assesses whether the firm can keep capital above required minimums after those actions, and whether its process is sound.

The Fed's power to object has changed over time. In historical CCAR, the Fed could object to a plan on quantitative or qualitative grounds. The qualitative objection was phased out: the Fed removed it for large and noncomplex firms in 2019, and eliminated it for the largest firms (LISCC and large and complex firms) with the stress capital buffer final rule, effective 2020. The stress capital buffer framework and supervisory horizontal reviews replaced it. The stress capital buffer ties stress test results to a firm's capital requirements. The process expectations from historical CCAR remain relevant as supervisory guidance, and the qualitative discussion in this page draws on them.

This guide sorts capital planning expectations into five themes. This is a study framework, not the Fed's official wording. The underlying source is the Fed's 2013 report, "Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice". Check your GARP reading for the exact wording of its principles. The five themes are: first, sound risk identification and measurement. Second, policies and procedures that govern capital planning, including capital goals and capital actions. Third, a robust process for assessing capital adequacy (capital positions relative to goals), including stress testing. Fourth, strong internal controls, independent review and audit. Fifth, effective board and senior management oversight, which is the governance of the process.

The key idea is that capital planning should be forward looking. It should be tied to the firm's own risks, use stress scenarios that reflect its own vulnerabilities, and be owned by the board. Weak firms tended to rely on one scenario, rough data, and limited challenge.

Key formulas to remember

Capital plan rule: 12 CFR 225.8 (Regulation Y): annual capital plan from large bank holding companies; This is the legal basis for CCAR. Know that it requires an annual submission to the Federal Reserve.
Planning horizon: At least 9 quarters, beginning with the fourth quarter of the calendar year before the submission year; Projections cover capital, losses, revenue and reserves over this period.
Pro forma capital ratio test: Projected capital ratio ≥ required minimum, after planned capital actions, under stress; The ratio is tested through the whole horizon, not only at the end.
Five themes of capital adequacy (study framework): Risk identification and measurement; policies and procedures (capital goals, capital actions); capital adequacy assessment including stress testing; internal controls, independent review and audit; board and senior management oversight (governance); This is a study framework, not the Fed's official list. Use it as a checklist to classify any practice or weakness in a question, and confirm wording against your GARP reading. Capital actions sit under policy. Governance is board and senior management oversight.
Capital plan contents: Capital policy + stress analysis + pro forma ratios + planned capital actions + process description; A missing component is a typical reason for a plan to be seen as deficient.

How to solve Supervisory Expectations for Capital Planning (CCAR) questions

Most questions give a bank practice or a supervisory finding and ask which principle or requirement applies. Use a fixed routine.

1Read the stem and decide whether it asks about the rule (legal requirement), a principle, or a weakness in practice.
2If it is the rule, recall the plan content: horizon of at least nine quarters, stress and expected conditions, capital actions, and annual submission.
3If it is a principle, link the practice to one of five themes: risk identification, policies, stress projection, controls and review, or governance.
4Check who is responsible. Board approval and senior management oversight point to governance.
5Look for independence words such as validation, audit and challenge. These point to internal controls.
6Look for words about scenarios, losses and revenue. These point to projection under stress.
7Eliminate options that claim capital is a one-time number, uses only a single scenario, or has no board role.
8Choose the answer that fits the stated principle and the forward-looking, firm-specific spirit of CCAR.

Quickest way: Five-theme sort

When to use it: Use when the question lists several practices and asks which best supports an effective capital process, or which is a weakness.

Write R, P, S, C, G for Risk, Policy, Stress, Controls, Governance.
Tag each option with one letter.
Cross out options that rely on one scenario, no review, or no board involvement.
Choose the option that is most firm-specific and forward looking.

Common mistakes in Supervisory Expectations for Capital Planning (CCAR)

Treating CCAR as only a quantitative stress test.
Public results focus on projected ratios.
Fix: Remember the Fed's expectations also cover the process: governance, controls and risk identification. In historical CCAR a weak process could lead to a qualitative objection even with adequate ratios. That objection was phased out: removed for large and noncomplex firms in 2019, and eliminated for the largest firms with the stress capital buffer rule effective 2020. The process expectations remain as supervisory guidance.
Confusing CCAR with DFAST.
Both use stress scenarios and are run by the Fed.
Fix: CCAR evaluates the firm's own planned capital actions as part of its capital plan. DFAST is the Dodd-Frank supervisory stress test, which assumes standardized capital actions. They are not simply parallel processes today: the stress capital buffer now links stress test results to capital requirements.
Assuming one supervisory scenario is enough.
Students think supervisors set all scenarios.
Fix: Firms are expected to design scenarios that reflect their own risks and business model, in addition to the supervisory scenarios.
Forgetting the planning horizon.
Numbers are easy to mix up.
Fix: Recall at least nine quarters of projections and annual submission.
Placing board oversight under internal controls.
Both involve review and challenge.
Fix: Board and senior management approval and ownership are governance. Independent validation and audit are internal controls.
Thinking capital planning ignores payouts.
Capital is seen only as a buffer.
Fix: Dividends, buybacks and issuance are core parts of the plan. The test is whether capital stays above minimums after these actions.

Worked examples

Example 1

A bank holding company's capital plan uses a single stress scenario that is the supervisory scenario only. Its business is concentrated in commercial real estate. Which theme of effective capital planning is most clearly weak, and what should the bank do?

Show the solution

The issue is how the firm projects capital under stress.
The firm is expected to use scenarios that reflect its own risks, not only the supervisory scenario.
The firm has a concentration in commercial real estate, so its own vulnerabilities are not captured.
The fix is to design additional firm-specific stress scenarios, for example a severe real estate downturn, and project losses, revenue and capital through the horizon.

Answer: Stress-based projection (with risk identification) is weak. The bank should add firm-specific scenarios reflecting its commercial real estate concentration.

Example 2

A bank's board delegates all capital plan decisions to the treasury team and reviews the plan only after it is submitted to the Federal Reserve. Which of the five themes is violated, and why?

Show the solution

The facts concern who approves and oversees the plan.
The board is expected to review and approve the plan and capital actions, and senior management must oversee the process.
Here the board sees the plan only after submission, so there was no effective oversight or challenge before submission.
This is a governance matter, not a model or data issue.

Answer: Effective board and senior management oversight (governance) is violated, because the board did not review and approve the plan before submission.

Exam tips

Know the five themes and be able to sort a practice into one quickly. Treat the list as a study framework and check the wording in your GARP reading.
Remember that CCAR has a quantitative side (ratios under stress) and a process side (governance, controls, risk identification). The qualitative objection was phased out: removed for large and noncomplex firms in 2019 and eliminated for the largest firms with the stress capital buffer rule effective 2020. The stress capital buffer now ties stress results to capital requirements, and the process expectations remain as supervisory guidance.
Expect questions that give a weakness and ask for the fix. The fix is usually firm-specific scenarios, independent review or board involvement.
Do not mix up CCAR with DFAST. Look for the firm's own planned capital actions as the CCAR marker; DFAST assumes standardized capital actions.
Use the rule details: annual submission, at least nine quarters, capital above minimums after capital actions.

Practice questions from Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice

Supervisory Expectations for Capital Planning (CCAR): frequently asked questions

What is CCAR in simple terms?

CCAR is the Federal Reserve's annual assessment of capital planning at large US bank holding companies. It checks whether a firm would keep enough capital after paying dividends and buybacks in a severe stress. It also reviews the quality of the firm's process.

Which rule requires the capital plan?

The capital plan rule is in Regulation Y, 12 CFR 225.8. It requires large bank holding companies to submit an annual capital plan to the Federal Reserve. The plan covers a horizon of at least nine quarters.

What are the five themes of effective capital planning?

In this guide's study framework they are risk identification and measurement; policies and procedures, including capital goals and capital actions; a capital adequacy assessment process, including stress testing; internal controls, independent review and audit; and board and senior management oversight. This is not the Fed's official list, so check the wording in your GARP reading.

Can the Federal Reserve object to a capital plan even if ratios look adequate?

In historical CCAR, yes. The Fed could object on qualitative grounds, such as weaknesses in governance, controls, scenario design or risk identification. That qualitative objection was phased out: removed for large and noncomplex firms in 2019, and eliminated for the largest firms with the stress capital buffer rule effective 2020. The stress capital buffer now ties stress test results to capital requirements.