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FRM Part I · FRM Exam Part I · Stress Testing

Which statement best describes a key difference between the Federal Reserve's CCAR and the DFAST exercise in the United States?

CCAR adds a qualitative review of a bank's capital planning process and can lead to an objection to planned dividends or buybacks, while DFAST is mainly a quantitative projection of losses and capital under supervisory scenarios without that qualitative judgement on capital planning.

  1. ACCAR includes a qualitative assessment of capital planning processes and can result in objection to a bank's planned capital distributions, whereas DFAST is a purely quantitative supervisory and company-run stress testCorrect
  2. BDFAST applies only to insurance companies, whereas CCAR applies only to banks
  3. CCCAR uses only a baseline scenario, whereas DFAST uses only adverse scenarios
  4. DDFAST requires banks to hold a fixed 10% leverage ratio under stress, whereas CCAR sets no minimum

Explanation

CCAR combines quantitative projections with a qualitative review of a bank's capital planning and can lead to objection to capital actions. DFAST is a forward-looking quantitative exercise assessing capital under scenarios. The other options invent differences about institution type, scenario use and fixed ratios.

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