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FRM Part II · FRM Exam Part II · Solvency, Liquidity and Other Regulation After the Global Financial Crisis

A US bank holding company is preparing for supervisory stress testing. Which statement best distinguishes the Dodd-Frank Act Stress Test (DFAST) from the Comprehensive Capital Analysis and Review (CCAR) in the way these programs are generally described?

DFAST is a quantitative projection of losses, revenues and capital under supervisory scenarios. CCAR goes further by reviewing the bank's capital plan, its planning process and its planned distributions such as dividends and share repurchases, so the key difference is the capital plan and distribution assessment.

  1. ADFAST is a forward-looking quantitative projection of losses, revenues and capital under supervisory scenarios, whereas CCAR adds a review of the firm's capital plan and planned capital distributionsCorrect
  2. BDFAST applies only to community banks and CCAR applies only to foreign banks
  3. CDFAST evaluates liquidity coverage and CCAR evaluates the leverage ratio only
  4. DDFAST uses only the bank's own scenarios, whereas CCAR uses no scenarios

Explanation

DFAST is a supervisory quantitative stress projection of capital under prescribed scenarios. CCAR builds on this by assessing the firm's capital planning process and its proposed dividends and buybacks. The other options misstate the scope of both programs.

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