Earlier today, Federal Reserve Vice Chairman Randal Quarles outlined the recent changes in the upcoming Dodd Frank Annual Stress Testing (DFAST) and Comprehensive Capital Analysis and Review (CCAR) results. His remarks provide necessary clarity regarding how the Federal Reserve conducted its COVID-19 sensitivity analysis, how the analysis will be weaved into the DFAST/CCAR disclosure and the timing of the Stress Capital Buffer (SCB) public disclosure.

Importantly for SIFMA members, the COVID-19 sensitivity analysis did not include any add-ons to the Global Market Shock or Large Counterparty Default components which we strongly advocated against.  Vice Chairman Quarles’ comments were positive as they provided certainty regarding CCAR/DFAST disclosure including the COVID-19 sensitivity analysis, and confirmation that the methodology to size the SCB was unchanged.

After today’s speech some questions do remain. These include (1) how the Federal Reserve will consider capital actions for the second half of the year; (2) whether there may be an off cycle supervisory stress test event; and (3) how supervisors will continue to use the COVID -19 sensitivity analysis in the 3^rd and 4^th quarter.

The Fed’s approach to the 2020 CCAR disclosures delineated today provides very helpful clarity on this year’s process and we look forward to a similarly constructive approach to these remaining SCB and COVID-19 sensitivity analysis issues that the Fed will consider during the balance of the year.

Coryann Stefansson is Managing Director and Head of Prudential Capital & Liquidity Policy.