August 4, 2022 

Ms. Helga Houston 

Chief Risk Officer

Huntington Bancshares Incorporated 

41 South High Street 

Columbus, Ohio 43215 

Subject: Response to request for reconsideration of Huntington Bancshares Incorporated’s stress 

capital buffer requirement, pursuant to the Board’s capital plan rules 

Dear Ms. Houston: 

This letter is in response to the request by Huntington Bancshares Incorporated 

(“HBAN”) for reconsideration of the stress capital buffer requirement provided to HBAN by the 

Board on June 23, 2022. For the reasons stated below, the Board has affirmed the stress capital 

buffer requirement previously provided to HBAN. In addition, with respect to the request by 

HBAN for an informal hearing in connection with the request for reconsideration, the Board has 

not ordered an informal hearing. 

I. Background 

The Board’s capital plan rules1

 establish the Board’s process for determining the stress 

capital buffer requirement applicable to a firm subject to the capital plan rules. Pursuant to those 

rules, the Board generally will provide a firm with notice of its stress capital buffer requirement 

by June 30 of each year in which the firm submits an annual capital plan.2 On June 23, 2022, the 

Board provided HBAN with notice that its stress capital buffer requirement associated with its 

2022 annual capital plan submission is 3.3 percent.3 

1

 12 CFR 225.8; 12 CFR 238.170. 

2

 12 CFR 225.8(h)(1); 12 CFR 238.170(h)(1). 

3

 See email regarding 2022 Stress Test Results (June 23, 2022). 
The capital plan rules permit a firm to request reconsideration of the stress capital buffer 

requirement within 15 calendar days of receiving notice of the requirement.4 HBAN requested 

reconsideration of its stress capital buffer requirement on July 7, 2022. A request for 

reconsideration may include a request for an informal hearing on the firm’s request for 

reconsideration.5 HBAN’s request for reconsideration included a request for an informal 

hearing. The capital plan rules generally provide that the Board will notify a firm of the Board’s 

decision to affirm or modify the firm’s stress capital buffer requirement within 30 calendar days 

of receipt of the firm’s request for reconsideration, or within 30 days of the conclusion of an 

informal hearing regarding such a request.6

In each year in which a firm submits an annual capital plan, the Board generally will 

provide the firm with a final stress capital buffer requirement, as well as confirmation of the 

firm’s final planned capital distributions for that year, by August 31.7 Unless otherwise 

determined by the Board, the final planned capital distributions and final stress capital buffer 

requirement for a given year become effective October 1 of that year.8

 A stress capital buffer 

requirement that becomes effective will remain effective until superseded.9

II. Stress Testing Framework

The stress capital buffer requirement is established based, in part, on the results of a 

supervisory stress test conducted by the Board. Specifically, a firm’s stress capital buffer 

requirement is the greater of 2.5 percent or the following calculation: (1) the difference between 

the firm’s starting and minimum projected common equity tier 1 (“CET1”) capital ratios under 

the severely adverse scenario in the Board’s supervisory stress test plus (2) the sum of the dollar 

amount of the firm’s planned common stock dividends for each of the fourth through seventh 

quarters of the planning horizon10 as a percentage of risk-weighted assets.11 The stress capital 

4

 12 CFR 225.8(h)(2)(i) and (i)(2); 12 CFR 238.170(h)(2)(i) and (i)(2). 

5

 12 CFR 225.8(i)(3)(ii); 12 CFR 238.170(i)(3)(ii). 

6

 12 CFR 225.8(i)(5); 12 CFR 238.170(i)(5). 

7

 12 CFR 225.8(h)(4)(i); 12 CFR 238.170(h)(4)(i). 

8

 12 CFR 225.8(h)(4)(ii)(A); 12 CFR 238.170(h)(4)(ii)(A). 

9

 12 CFR 225.8(h)(4)(ii)(B); 12 CFR 238.170(h)(4)(ii)(B). 

10 The planning horizon is the period of at least nine consecutive quarters over which the 

relevant projections extend, beginning with the quarter preceding the quarter in which the firm 

submits its capital plan.

11 12 CFR 225.8(f)(2); 12 CFR 238.170(f)(2). 
buffer requirement provided to HBAN on June 23, 2022, was calculated based on 2022 

supervisory stress test results released by the Board.12

The results of the Board’s supervisory stress tests are projected using a set of models 

developed or selected by the Federal Reserve that take as inputs (1) the supervisory scenarios 

created by the Federal Reserve and (2) firm-provided data on the firm’s financial condition and 

risk characteristics. To provide firms and the public with greater transparency regarding the 

Board’s process for designing supervisory scenarios for stress testing, the Board first finalized 

the Policy Statement on the Scenario Design Framework (“Scenario Policy Statement”) in 

2013.13 

Consistent with the principles described in the Stress Testing Policy Statement, the 

Federal Reserve designed the system of models so they would result in projections that are 

(1) from an independent supervisory perspective; (2) forward-looking; (3) consistent and 

comparable across covered companies; (4) generated from simple approaches, where 

appropriate; (5) robust and stable; (6) conservative; and (7) able to capture the effect of 

economic stress.14

The Federal Reserve’s models rely on detailed portfolio data provided by firms but 

generally do not rely on models or estimates provided by firms, consistent with the modeling 

principle that emphasizes an independent perspective. 

12 See Board of Governors of the Federal Reserve System, 2022 Supervisory Stress Test Results

(June 2022), available at https://www.federalreserve.gov/publications/files/2022-dfast-results20220623.pdf. 

13 The Board updated the Scenario Policy Statement to provide additional information regarding 

the path of home price variables, in particular, reducing uncertainty about the path of these 

variables in the severely adverse scenario. See 12 CFR part 252, Appendix A. The Board 

adopted a final Stress Testing Policy Statement to provide additional information about the 

Board’s principles and policies with regard to the development and validation of supervisory 

stress test models. See 12 CFR part 252, Appendix B. As described in the Stress Testing Policy 

Statement, highly material changes to the supervisory stress test models are phased in over two 

years to reduce year-over-year volatility stemming from updates to the supervisory models. The 

Stress Testing Policy Statement defines a model change as highly material if its use results in a 

change in the CET1 ratio of 50 basis points or more for one or more firms, relative to the model 

used in prior years’ supervisory exercises. See 12 CFR part 252, Appendix B, at 2.3. This 

approach contributes to the stability of the results of the supervisory stress test by ensuring that 

changes in model projections primarily reflect changes in underlying risk factors and scenarios, 

year over year. 

14 12 CFR part 252, Appendix B, at 1. 
The Federal Reserve generally develops its models under an industry-level approach that 

is calibrated using data from many financial institutions. This approach reflects modeling 

principles that favor models resulting in consistent, comparable, and forward-looking 

projections. The Federal Reserve models the response of specific portfolios and instruments to 

variations in macroeconomic and financial-scenario variables such that differences across firms 

are driven by differences in firm-specific input data, as opposed to differences in model 

parameters and specifications. As a result, two firms with the same portfolio receive the same 

results for that portfolio in the supervisory stress test, facilitating the comparability of results. In 

addition, the industry-level approach promotes a forward-looking stress test, as it results in 

models that do not assume that historical patterns will necessarily continue into the future for 

individual firms. These policies also help to ensure that consistent and comparable supervisory 

models are forward-looking, robust, and stable.15

III. Discussion

As required by the Board’s capital plan rules, HBAN’s request for reconsideration of its 

stress capital buffer requirement included a detailed explanation of why it contends that 

reconsideration should be granted.16 

To ensure that review of HBAN’s request would be conducted with an independent 

perspective, a group of experts within the Federal Reserve System, who are independent of the 

staff who developed the models, analyzed the arguments made by HBAN in favor of 

reconsideration of its stress capital buffer requirement.17 With respect to each of the issues 

15 While the Federal Reserve limits the use of firm-specific fixed effects and the use of dummy 

variables indicating a loan vintage or specific year, it makes exceptions where appropriate. For 

example, the Federal Reserve may use firm-specific indicator variables, firm-provided estimates, 

or third-party models or data in instances in which it is not possible or appropriate to create a 

supervisory model for use in the stress test, including when supervisory data are insufficient to 

support an independently modeled estimate of losses or revenues. However, the Federal Reserve 

does not adjust supervisory projections for individual firms or implement firm-specific overlays 

in the supervisory stress test. This policy ensures that the supervisory stress test results are 

determined solely by supervisory models and firm-specific input data. The Federal Reserve has 

instituted a policy of not using additional input data submitted by one or more of the covered 

companies unless comparable data can be collected from all the firms that have material 

exposure in a given area. 

16 See 12 CFR 225.8(i)(3)(i). 

17 This group is composed of staff members from across the Federal Reserve System who are 

subject-matter experts and are not involved in supervisory modeling. This group’s model 

validation process includes reviews of model performance; conceptual soundness; and the 

processes, procedures, and controls used in model development, implementation, and the 

production of results. See Board of Governors of the Federal Reserve System, 2022 Supervisory 
raised in the request of HBAN, the experts considered whether the request pointed to any errors 

in the firm’s stress test results and whether each stress test model identified in the firm’s request 

is operating as intended, within the bounds of the Board’s published policies. The information in 

this letter regarding the Board’s stress testing policies and supervisory modeling practices was 

previously publicly disclosed, consistent with the Board’s practice to increase the transparency 

of the stress testing program.18

In its request, HBAN argues that the Federal Reserve’s models may have overstated 

noninterest expenses under the stress test conditions, which HBAN asserts may have materially 

increased the firm’s stress capital buffer requirement. Specifically, HBAN asserts that the 

noninterest expense data used in the supervisory stress test included a significant amount of nonrecurring, one-time expenses, and the firm argues that the inclusion of this data may have led to 

unrealistic projections of future noninterest expenses. With respect to this argument, the Board 

has assessed HBAN’s stress test results and the Federal Reserve’s models for errors. Through 

this assessment, the Board did not identify any errors in HBAN’s stress test results and has 

determined that the models operated as intended, within the bounds of the Board’s published 

policies.

As discussed above, HBAN’s request for reconsideration included a request for an 

informal hearing. The Board has determined not to grant HBAN’s request for an informal 

hearing regarding its request for reconsideration.19 The informal hearing process is intended to 

ensure that a firm is able to present its arguments to the Federal Reserve and to provide an 

opportunity for both the firm and the Federal Reserve to ask any questions regarding the request, 

including questions regarding disputed issues of material fact. Since the submission of HBAN’s 

request, Federal Reserve staff has met with representatives from HBAN. The firm described its 

arguments for reconsideration in the meeting, and both the firm and Federal Reserve staff had the 

opportunity to ask questions. Federal Reserve staff also offered to hold additional meetings. In 

light of this process, the Board does not believe it is necessary to order an informal hearing 

regarding HBAN’s request. 

Noninterest Expenses

Stress Test Methodology at 5–6 (March 2022), available at 

https://www.federalreserve.gov/publications/files/2022-march-supervisory-stress-testmethodology.pdf. 

18 See supra note 12. 

19 See 12 CFR 225.8(i)(4)(i) (providing that the Board has sole discretion regarding whether to 

order an informal hearing).
HBAN asserts that the Federal Reserve’s models may not appropriately reflect the nonrecurring, one-time nature of expenses related to the firm’s recent acquisition of TCF Financial 

Corporation (“TCF”), which closed on June 9, 2021, and consequently may overstate future 

noninterest expenses in its pre-provision net revenue (“PPNR”) model. The Board investigated 

the firm’s assertion and determined that the PPNR and Operational Risk models are working as 

intended to produce the projections for HBAN and TCF’s combined entity. The Board verified 

that modeling teams had followed established processes in producing pro forma time series for 

purposes of modeling the combined entity. The Board’s investigation concluded that the 

historic-expense observations were appropriate and consistent with the established methodology. 

The Board’s investigation also concluded that the operational loss component was correctly 

applied to project the firm’s losses under stress. 

IV. Conclusion 

After consideration of the Board’s stress testing policies and all relevant facts, including 

the information provided in the request, and consistent with the Board’s regulations, the Board 

has determined to affirm the stress capital buffer requirement provided to HBAN on 

June 23, 2022. The Board notes that it is focused on continuously improving the stress testing 

framework, including the Board’s supervisory models. 

The final stress capital buffer requirement for HBAN is 3.3 percent. The Board hereby 

confirms that the planned capital distributions HBAN submitted as part of its 2022 capital plan 

submitted on or before April 5, incorporating any adjustments made pursuant to 12 CFR 

225.8(h)(2), are final. HBAN’s final stress capital buffer requirement and final planned capital 

distributions are effective October 1, 2022. 

Please contact Julie Anthony at (202) 475-6682 with any questions. 

Sincerely yours, 

Margaret McCloskey Shanks 

Deputy Secretary of the Board

cc: Tyler A. Burkle, Assistant Vice President

Federal Reserve Bank of Cleveland