Capital Planning: Best Practices Panel Jamey Hubbs, OSFI Ed Pelz, - - PowerPoint PPT Presentation

Capital Planning: Best Practices Panel

Jamey Hubbs, OSFI Ed Pelz, Federal Reserve Bank of Chicago Paul Sternhagen, Federal Reserve Bank of San Francisco

Moody’s Risk Practitioner Conference, October 21, 2013

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Seven Principles of an Effective Capital Adequacy Process

• 1. Sound foundational risk management
• Sound infrastructure
• Systematic and repeatable material risk identification process
• 2. Effective loss estimation methodologies
• Process to translate risk measures into potential losses
• Implementable for range of stressed scenarios
• Ability to aggregate losses across BHC
• 3. Solid resource estimation methodologies
• Clear definition of available capital resources
• Process to estimate available resources over same range of scenarios
• 4. Sufficient capital adequacy impact assessment
• Impact of loss and resource aggregation on capital adequacy
• Compare to BHC capital goals

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Seven Principles of an Effective Capital Adequacy Process

• 5. Comprehensive capital policy and capital planning
• Capital goals and appropriate capital levels
• Composition of capital
• Capital actions
• 6. Robust internal controls
• Policies and procedures
• Model validation and independent review
• Comprehensive documentation
• 7. Effective governance
• Board and senior management oversight
• High level of engagement including effective challenge process