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

In the Federal Reserve's CCAR framework, which outcome is a qualitative concern rather than a quantitative failure?

A qualitative concern arises when supervisors find deficiencies in a firm's capital planning process, risk identification, governance or controls. This can lead to an objection to its capital plan even when projected post-stress capital ratios remain above the required minimums.

  1. ASupervisors object to a firm's capital plan because its internal capital planning processes, risk identification or governance are deemed deficientCorrect
  2. BThe firm's projected post-stress Tier 1 common ratio falls below the minimum
  3. CThe firm's projected leverage ratio falls below the minimum
  4. DThe firm's projected total capital ratio falls below the minimum

Explanation

Quantitative failures arise when projected post-stress capital ratios fall below required minimums. A qualitative objection concerns weaknesses in capital planning processes, risk management, internal controls or governance, even if the ratios pass.

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