Bank of New York Mellon : Dodd-Frank Act Stress Test Results October 2019
10/09/2019 | 06:31pm EST
The Bank of New York Mellon Corporation
Company Run Stress Test
Mid-cycleDodd-Frank Act Stress Test Results
October 9, 2019
Severely Adverse Scenario
Throughout this document The Bank of New York Mellon Corporation on a consolidated basis is referred to as "BNY Mellon," the "Firm," "we," "our" and "us." BNY Mellon and The Bank of New York Mellon (the "Institutional Bank") are required to conduct company-wide stress tests pursuant to 12 C.F.R. part 252 (the "Regulation"). A summary of those results is also required to be published under the Regulation. Accordingly, we have developed the following disclosure, which contains the information required by the RegulationtobedisclosedpubliclyandhasbeenpreparedinaccordancewiththeRegulation.Anydifferences between the presentation of information concerning BNYMellon in this disclosure and how we present such information for other purposes are solely due to our efforts to comply with the Regulation. The information presented in this disclosure does not, in any way, reflect changes to our organizational structure, business plans or practices, or strategy.
The projections contained herein are based on BNY Mellon's internally-developed Severely Adverse Scenario for the 2019 mid-cycleDodd-Frank Act Stress Testing ("DFAST") exercise. The results of this exercise represent estimates of potential outcomes based on hypothetical stressed economic conditions. BNY Mellon's mid-cycle DFAST exercise seeks to incorporate loss events tailored to its unique risk profile. To capture the unique risks inherent in our core activities, BNY Mellon developed an idiosyncratic Severely Adverse Scenario that is premised on counterparty credit risk and includes additional idiosyncratic operational risk events.
TheFirm's DFASTrelieson various models toforecastperformance understressedconditions.Thesemodels coverlossestimates,revenueprojections,scenarioinfrastructure,balancesheetprojectionsandrisk-weighted asset calculations. The projections contained within this disclosure represent hypothetical estimates that involve an economic outcome that is more adverse than expected, and accordingly these estimates are not forecasts of expected losses, pre-provision net revenue ("PPNR"), net income before taxes, or capital ratios.
The Regulation requires us, among other things, to make certain assumptions regarding capital actions ("Dodd-Frank Capital Actions") when computing pro forma capital ratios across the nine-quarter planning horizon. These Dodd-Frank Capital Actions include:
For the first quarter of the stress test horizon, actual capital actions;
For the second through ninth quarters of the planning horizon, the following capital actions:
Common stock dividends equal to the quarterly average dollar amount of common stock dividends that BNY Mellon paid in the previous four quarters (that is, the first quarter of the planning horizon and the preceding three calendar quarters) plus common stock dividends attributable to issuances related to expensed employee compensation, or in connection with a planned merger or acquisition to the extent reflected in our pro forma balance sheet estimates;
Payments on any other instrument that is eligible for inclusion in the numerator of a regulatory capital ratio equal to the stated dividend, interest, or principal due on that instrument during the quarter;
An assumption of no redemption or repurchase of any capital instrument that is eligible for inclusion in the numerator of a regulatory capital ratio; and
An assumption of no issuances of common stock or preferred stock, except for issuances related to expensed employee compensation or in connection with a planned merger or acquisition reflected in our pro forma balance sheet estimates.
In practice, if a severely adverse economic scenario were to in fact occur, we could change planned distributions and it is highly likely that we would respond with certain capital conservation actions consistent with internal policy. The stress test results summarized in this report should not be interpreted as expected or likely outcomes, but rather as a possible result under hypothetical, highly adverse economic conditions.
Severely Adverse Scenario Projections for BNY Mellon
As demonstrated by BNYMellon's DFAST results, which are detailed below, we maintain excess regulatory capital in every quarter, for every ratio, over the entire planning horizon throughout the Severely Adverse Scenario. This success is driven by a number of factors, including the Firm's strong capital generation and its risk profile.
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BNY Mellon - Tables of Statistical Results
Dodd-Frank Act Stress Testing Results
The capital ratios are calculated using the Dodd-Frank Capital Actions. These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of expected losses, revenues, net income before taxes, or capital ratios. The minimum capital ratio presented is for the period from the third quarter of 2019 through the third quarter of 2021.
Table 1: Projected Stressed Capital Ratios Through the Third Quarter of 2021 Under the Severely Adverse Scenario
Stressed Capital Ratios
Common Equity Tier 1 capital ratio (%)
Tier 1 capital ratio (%)
Total capital ratio (%)
Tier 1 leverage ratio (%)
Supplementary leverage ratio (%)
1Actual second quarter 2019 Common Equity Tier 1, Tier 1 and Total capital ratios are calculated using the Standardized Approach. At June 30, 2019 BNY Mellon's reported Common Equity Tier 1, Tier 1 capital, and Total capital ratios were 11.1%, 13.2%, and 14.0%, respectively, based on credit risk asset risk-weightings using the Advanced Approaches, which was the Firm's constraining measure for that quarter.
Table 2: Projected Risk-Weighted Assets ("RWA")
Actual 2Q 2019
Projected 3Q 2021
RWA1 ($ in Millions)
1RWA calculated using the U.S. capital rules' Standardized Approach methodology.
Table 3: Projected Loan Losses by Type of Loan for the Third Quarter of 2019 through the Third Quarter of 2021 Under the Severely Adverse Scenario
Millions of Dollars
Portfolio Loss Rates (%)1
First-lien mortgages, domestic
Junior liens and HELOCs, domestic
Commercial real estate, domestic
Commercial and industrial
1Average loan balance used to calculate portfolio loss rates excludes loans held for sale and loans held for investment under the fair value option, and are calculated over nine quarters. Portfolio loss rates are rounded to the nearest tenth of a percentage point.
Table 4: Projected Pre-Provision Net Revenue ("PPNR"), Provisions, Losses, and Net Income Before Taxes for the Third Quarter of 2019 Through the Third Quarter of 2021 Under the Severely Adverse Scenario
Millions of Dollars
Percent of Average
Realized losses/(gains) on securities Available-for-
Trading and counterparty losses2
Net income before taxes
Other Comprehensive Income
Other effects on capital
Actual 2Q 2019
AOCI included in capital (Millions of dollars)
1PPNR includes losses from operational risk events.
2Trading and counterparty losses include mark-to-market and credit valuation adjustments losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities.
3Other losses/(gains) includes projected change in FundingValueAdjustments/Overnight Index Swaps as well as CLO Impairment losses. In addition, counterparty default and collateral liquidation losses are included.
4Average assets are averaged over the nine-quarter planning horizon. Amounts are rounded to the nearest tenth of a percentage point.
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The Bank of New York Mellon Corporation published this content on 09 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 October 2019 22:30:07 UTC