Bank Holding Companies (BHC's) may be subjected to severe financial and economic stress from time to time, which impacts their operations. Hence the Federal Reserve carries out an exercise called the Comprehensive Capital Analysis Review (‘CCAR’) every year.

1. An overview of the CCAR
Bank Holding Companies (BHC's) may be subjected to severe financial and economic
stress from time to time, which impacts their operations. Hence the Federal Reserve carries
out an exercise called the Comprehensive Capital Analysis Review (‘CCAR’) every year.
What is CCAR?
CCAR is a regulatory frameworkthat helps supervise, assess and regulate the BHCs. It
ensures that Large Bank Holding Companies (consolidated assets of $50 billion or more)
have enough capital to continue their operations through times of financial stress.
Purpose of the CCAR
The main purpose of the CCAR is to facilitatethe Bank Holding Company’s internal
planning process and its proposed capital distributions. Adequate capital is crucialfor the
BHCs to absorb any kind of unexpected loss and continue to lend to consumers and
businesses.

2. Elements in a Capital Plan:
A capital plan is a written presentation of the company’s capital adequacy and capital
planning strategies that includes some mandatory elements. These mandatory elements
are listed below:
1. An assessment of expected use of capital
2. Description of the planned capital actions.
3. Expected changes to BHC’s business plan that wouldimpact its capital adequacy
4. BHC’s process forcapital adequacy assessment including the BHC’s method of
maintaining capital ratios aboveregulatory minimum levels.
5. BHC’s capital policy
CCAR Challenges for Banks
Banks facechallenges in meeting the qualitative aspects of the CCAR expectations. They
need to revamp business intelligence, revenue projections, capital planning and risk
monitoring.
The challenges can be divided into two categories, viz., Data Challenges and Regulatory
Reporting Challenges.
Data
Challenges
Regulatory Reporting
Challenges
 Inferior data quality that
creates resistance to comply
with the CCAR reporting.
 Data elements need to be in a
certain location or format
whichcan be used for
submission.
 There are huge gaps in data
quality, availability and
accuracy that need to be
eliminated.
 Large volumes of data needed
to be maintained to perform
stress tests.
 Due to rapid growth of data
requirements, the system
needs to be upgraded
periodically to increase
memory and storage.
 CCAR requires data
integration, whichis costly
and time consuming.
 CCAR and DFAST Reporting
need to be accurate and cost
effective.
 Regulations are dynamic
and fluctuating in nature.
 Regulatory environment is
complex.
 Significant amount of time
and resources are required
for the report preparation
process

3. Hexanika to the Rescue!
Hexanika is a RegTech big data software company,which has developed a software
platform SmartJoin, and a softwareproduct SmartReg for financial institutions to address
data sourcing and reporting challenges forregulatory compliance.
The automated nature of SmartReg keeps regulatory reporting in harmony with the
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regulatory updates , thereby catering to market needs efficiently.
References:
http://libertystreeteconomics.newyorkfed.org/2012/07/ccar-more-than-a-stress-
test.html#.VkNEEdbFLVs
http://riskarticles.com/wp-content/uploads/2013/06/An-Introduction-to-CCAR.pdf
http://www.moodysanalytics.com/~/media/Brochures/Enterprise-Risk-
Solutions/Regulatory-Reporting/Regulatory-Reporting-for-Comprehensive-Capital-
Analysis-and-Review.pdf
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