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FRM Part II · FRM Exam Part II · Stress Testing Banks

A risk officer at a large US bank holding company is explaining the difference between the Federal Reserve's DFAST and CCAR exercises. Which statement is most accurate?

DFAST projects losses, revenues and capital under supervisory scenarios using standardized capital action assumptions. CCAR goes further by evaluating the bank's own planned dividends and buybacks and the strength of its capital planning process, so it is both quantitative and qualitative.

  1. ADFAST is run only by banks themselves, while CCAR is run only by the Federal Reserve
  2. BDFAST projects losses, revenues and capital under supervisory scenarios using standardized capital actions, while CCAR also assesses the firm's planned capital actions and capital planning processCorrect
  3. CCCAR applies only to banks with less than USD 10 billion in assets, while DFAST applies to the largest banks
  4. DCCAR uses only the firm's own scenarios, while DFAST uses only historical scenarios

Explanation

DFAST is a forward-looking quantitative exercise using prescribed, standardized capital action assumptions. CCAR adds assessment of the firm's own planned capital distributions and the quality of its capital planning process. The other options misstate who runs the tests, who is covered, and the scenario sources.

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