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What are differences among CCAR, DFAST and CECL?

Updated: Oct 10, 2019

CCAR stands for Comprehensive Capital Analysis and Review that is an annual exercise to ensure that large financial institutions have adequate capital reserves to continue operations through times of economic and financial stress. DFAST (Dodd-Frank Act stress testing) is a complementary exercise to CCAR for institutions that do not meet CCAR criteria. The DFAST process is no longer required by the federal regulators after recent changes.

CCAR requires losses and capital forecasts over various economic scenarios provided by the regulators that will cover baseline, adverse and severely adverse environments.

On the other hand, CECL is a new accounting standard that requires timely, forward-looking measurement of lifetime risk using “reasonable and supportable” forecasts.

In spite of significant impacts to capital requirement and planning, CECL does not require the use of multiple scenario forecast. However, multi-scenario analysis will provide a more comprehensive picture of potential losses under volatile economic conditions.

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