Board of Governors of the Federal Reserve System

Washington, DC 20551

February 5,2019

Mr. Stephen Squeri, CEO

American Express Company

200 Vesey Street

New York, NY 10285

Dear Mr. Squeri:

American Express Company (“American Express”) is subject to section 165 ofthe DoddFrank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and, accordingly,

would be required to participate in supervisory and company-run stress tests in 2019.1 For the

reasons stated below, the Board is providing American Express relieffrom all regulatory

requirements, including disclosure requirements, related to supervisory stress testing and

company-run stress testing for the 2019 stress test cycle and is providing related relieffrom

certain capital planning and regulatory reporting requirements that would otherwise apply in the

2019 stress test cycle. In addition, as discussed in detail below, American Express will not be

required to submit a capital plan to the Board in 2019 or participate in the 2019 Comprehensive

Capital Analysis and Review (“CCAR 2019”).2

1 Pub. L. No. 111-203, 124 Stat. 1376 (2010); see 12 CFR part 252, subparts E and F.

2 American Express remains subject to the requirement to develop and maintain a capital plan,

and the board of directors of American Express (or designated subcommittee thereof) remains

subject to the requirement to review and approve the firm’s capital plan.

3 12 CFR part 252, subparts E and F.

I. Background

Section 165 ofthe Dodd-Frank Act, as enacted, directed the Board to establish enhanced

prudential standards for bank holding companies with total consolidated assets of $50 billion or

more, including annual supervisory stress tests, and issue regulations requiring these bank

holding companies to conduct company-run stress tests (collectively, “stress test rules”).3

Pursuant to the Board’s stress test rules, the Board has conducted supervisory stress tests of bank
holding companies with total consolidated assets of $50 billion or more, and these bank holding

companies are required to conduct annual and mid-cycle company-run stress tests.4 In

conducting the supervisory stress tests, the Board projects balance sheets, risk-weighted assets,

net income, and resulting post stress capital levels and regulatory capital ratios over a planning

horizon under baseline, adverse, and severely adverse scenarios, incorporating capital action

assumptions prescribed in the Board’s stress test rules.5 For the annual company-run stress tests,

a bank holding company uses the same planning horizon, capital action assumptions, and

baseline, adverse, and severely adverse scenarios used in the supervisory stress test.6

4 On July 6, 2018, the Board issued a statement regarding the impact ofthe Economic Growth,

Regulatory Relief, and Consumer Protection Act. The Board announced that it will not take

action to require bank holding companies with total consolidated assets greater than or equal to

$50 billion but less than $100 billion to comply with the Board’s stress test rules. See

www.federalreserve.gov/newsevents/pressreleases/files/bcreg20180706bl.pdf.

5 See 12 CFR 252.44

6 See 12 CFR 252.54.

7 Pub. L.No. 115-174, 132 Stat. 1296(2018).

8 Eighteen months after the date ofEGRRCPA’s enactment, bank holding companies with total

consolidated assets ofless than $250 billion will no longer be subject to section 165, provided

that the Board may apply any enhanced prudential standard to a bank holding company with

between $100 billion and $250 billion in total consolidated assets ifthe Board determines that

application ofthe prudential standard is appropriate to prevent or mitigate risks to the financial

stability ofthe United States, or to promote safety and soundness.

9 EGRRCPA § 401(d)(3). Pub. L. No. 115-174, 132 Stat. 1296(2018).

10 EGRRCPA § 401 (a)(1)(B)(i) (to be codified at 12 U.S.C. § 5365(a)(2)(A)).

On May 24, 2018, Congress enacted the Economic Growth, Regulatory Relief, and

Consumer Protection Act (“EGRRCPA”).7 EGRRCPA amended section 165 ofthe Dodd-Frank

Act to increase the threshold for application of enhanced prudential standards to bank holding

companies.8 Prior to eighteen months after the date of EGRRCPA’s enactment, Board may

exempt by order any bank holding company with total consolidated assets ofless than

$250 billion from any prudential standard under section 165 ofthe Dodd-Frank Act.9

II. Relief from Board’s stress test rules for the 2019 stress test cycle

In prescribing more stringent prudential standards under section 165, including stress test

requirements, the Board must differentiate among bank holding companies on an individual basis

or by category, taking into consideration their capital structure, riskiness, complexity, financial

activities (including the financial activities oftheir subsidiaries), size, and any other risk-related

factors that the Board deems appropriate.10
In assessing a bank holding company’s risk profile, the Board takes into consideration the 

company’s size, scope of operations, activities, and systemic importance. Size provides a

measure ofthe extent to which customers or counterparties may be exposed to a risk ofloss or

suffer a disruption in the provision ofservices if a bank holding company were to experience

distress and can serve as an indicator of operational and managerial complexity. Nonbank assets

may involve a broader range ofrisks than those associated with purely banking activities, and

reflect the degree to which a firm may be engaged in activities through legal entities that are not

subject to separate capital requirements or to the direct regulation and supervision applicable to a

regulated banking entity. Other measures ofrisk include cross-jurisdictional activity, off-balance

sheet exposure, and weighted short-term wholesale funding, which provide measures of a bank

holding company’s complexity, interconnectedness, and liquidity risk. As of

September 30, 2018, American Express reported total consolidated assets of $189.1 billion,

$58.3 billion in nonbank assets, $24.9 billion in off-balance sheet exposure,11 $8.9 billion in

weighted short-term wholesale funding, and $48.1 billion in cross-jurisdictional activity.

11 Measured as total exposure, as defined on FR Y-15, minus total consolidated assets, as

reported on the Consolidated Financial Statements for Holding Companies (FR Y-9C).

12 EGRRCPA § 401(d)(3). The Board’s stress test rules also permit the Board to extend any

deadline relating to company-run or supervisory stress testing. 12 CFR 252.3(b).

13 12 CFR 225.8(e)(l)(ii).

14 Id.

In assessing American Express’s risk profile, the Board also considered reports of

examination and other supervisory information, including a review of American Express’s 2018

capital plan and capital planning process, and the result ofthe Board’s 2018 supervisory stress

test, as well as other publicly reported information. In 2018, American Express received notice

that the Federal Reserve did not object to its capital plan or planned capital actions.

Based on this information, the Board has determined by order, through this letter, to

provide American Express relieffrom the regulatory requirements ofthe Board’s stress test rules

for the 2019 stress test cycle.12 Specifically, American Express is not required to participate in

the Board’s supervisory stress test or conduct a company-run stress test for the 2019 stress test

cycle.

III.Extension of 2019 capital plan submission requirement

Pursuant to the capital plan rule, American Express is required to submit a capital plan to

the Federal Reserve on an annual basis.13 Consistent with the relief described above, the Board

is providing a one-year extension ofthe requirement to submit a capital plan until

April 5, 2020.14 American Express is not required to participate in CCAR 2019. American

Express remains subject to the requirement to develop and maintain a capital plan, and the board

of directors of American Express (or designated subcommittee thereof) must review and approve
the firm’s capital plan.15 The Federal Reserve will continue to review the capital planning and

risk-management practices of American Express through the regular supervisory process.

15 12 CFR 225.8(e)(l)(i), (iii).

16 This letter also constitutes approval under 12 CFR 217.20 for any repurchases or redemptions

of capital instruments made by American Express that are included in the amount of capital

distributions approved as part ofthis order. Such repurchases or redemptions must be included

on the film’s list of planned distributions provided to the Board by April 5, 2019.

17 12 CFR 252.57(a)(l). IfAmerican Express’s capital plan includes any material business plan

changes, it may be required to provide supplemental information on any ofthese changes. The

Board may request additional information regarding American Express’s capital adequacy and

capital planning. 12 CFR 225.8(e)(3).

18 IfAmerican Express wishes to make additional capital distributions beyond the amount

approved under this letter, American Express may submit a capital plan to the Board or submit a

request to the Federal Reserve for approval to make such distributions before March 1, 2019, or

after July 1,2019. 12 CFR 225.8(g)(4).

As noted above, American Express received notice that the Federal Reserve did not

object to the capital plan submitted in 2018, including distributions planned for the period

beginning July 1, 2018, through June 30, 2019. For the period beginning July 1, 2019, through

June 30, 2020, the Board has approved American Express to make capital distributions up to the

amount that would have allowed the firm to remain above all minimum capital requirements in

CCAR 2018, adjusted for any changes in the firm’s regulatory capital ratios since the Federal

Reserve acted on the capital plan ofAmerican Express. In particular, American Express is

authorized to distribute, net of any issuance of capital, up to the sum ofthe following: (1) the

additional capital the firm could have distributed in CCAR 2018 and remained above minimum

requirements; plus (2) capital accretion, as measured by the change in its capital ratios since

CCAR 2018; plus (3) its approved planned capital distributions for the period January 1,2018

through June 30, 2019; minus (4) its actual capital distributions in the first quarter of 2019 and its

planned capital distributions for the second quarter of 2019.16

In addition, the Board is extending the deadline for submission of Schedule A -

Summary, Schedule B - Scenario, and Schedule F - Business Plan Changes ofthe FR Y-14A

until April 5, 2020.17 American Express must continue to submit Schedule C - Regulatory

Capital Instruments and Schedule E - Operational Risk ofthe FR Y-14A, as well as all FR Y14M and FR Y-14Q reports.

American Express must submit its planned capital actions for the period between

July 1, 2019 through June 30, 2020, by April 5, 2019.18 If American Express chooses to submit

a capital plan to the Board in the 2019 capital plan cycle notwithstanding the Board’s approval of

the additional capital distributions described above, American Express must submit the capital

plan to the Board by April 5, 2019, in accordance with the Board’s capital plan rule, and the firm
will be subject to a supervisory stress test by the Board, notwithstanding the reliefprovided in

this letter.

The actions ofthe Board are based on the foregoing and all the facts ofrecord. The

actions should not be construed as granting relieffrom any other conditions or commitments to

which American Express may be subject, including regulatory capital requirements19 and any

requirements under the Board’s stress test rules and related reporting requirements in the year

2020. Please contact Celeste Molleur at 202-452-2783 if you have questions.

19 See, e.g., 12CFR217.11.

Sincerely yours,

-------------------

Ann Misback

Secretary ofthe Board

cc: Brian O’Halloran, Vice President

Liz Kelly, Officer Institutional Supervision

Federal Reserve Bank ofNew York
Appendix: Details on Federal Reserve’s calculation of maximum approved planned capital

actions for 2019

The Federal Reserve will use the following worksheet to compute the maximum planned capital

distributions that American Express can make from July 1, 2019, through June 30, 2020, without

seeking approval from the Federal Reserve.

Worksheet for determining pre-approved 2019-2020 capital distributions, millions of dollars

Line / Item

A

CET1

capital

ratio

B

Tier 1

risk-based

capital

ratio

C

Tier 1

leverage

ratio

D

Total riskbased

capital

ratio

1. CCAR 2018 distributable capital

a. Capital ratio as of 12/31 /2018

b. Decline in capital ratio in CCAR 2018 4.0 3.8 3.3 3.6

c. Minimum Requirement 4.5 6.0 4.0 8.0

d. Capital ratio denominator as of 12/31/2018

2. Ad justed CCAR 2018 additional distributable

capital

= ((1.a-1.b- 1.c)*(1.d/100))

3. Planned capital actions

a. Planned capital actions PQ1-6 ofCCAR 2018 [redacted] 

b. Actual capital actions 2019:Q1

c. Approved planned capital actions 2019:Q2

4. 2019:Q3 - 2020:Q2 capital distribution capacity

= (2. + 3.a - 3.b - 3.c)

5. Maximum approved capital actions for 2019:Q3-2020:Q2_______________ _________

a. Net planned distributions from tier 2 capital = (4.D)

b. Net planned distributions from additional tier 1 capital

= (Min (4.B, 4.C,

4. D - Netplanned distributionsfrom tier 2 capital))

c. Net planned distributions from CET1 capital

= (Min (4.A,

4.B - net planned distributionsfrom additional tier 1 capital,

4. C - net planned distributionsfrom additional tier 1 capital,

4. D - netplanned distributionsfrom additional tier 1 and tier 2 capital)) __________
The Federal Reserve will complete the worksheet computing the maximum planned capital

distributions that American Express can make from July 1, 2019, through June 30, 2020,

consistent with the following description of each line item:

Line 1. CCAR 2018 distributable capital.

This section includes the information necessary to determine the additional capital distributions

that the firm could have made in CCAR 2018 and remained above minimum capital

requirements in the supervisory quantitative assessment, adjusted for the firm’s updated starting

capital ratios.

Line La. Capital ratio as of 12/31/2018.

The regulatory capital ratios calculated using the standardized approaches as reported on the

FR Y-9C as of December 31, 2018. Specifically, for line l.a., column A, the common equity tier 

1 capital ratio (BHCAP793); for line 1.a., column B, the Tier 1 capital ratio (BHCA7206); for

line l.a., column C, the Tier 1 leverage ratio (BHCA7204), and for line l.a., column D, the total

capital ratio (BHCA7205).

1.b. Decline in capital ratio in CCAR 2018.

For each capital ratio, the decline in the capital ratio equals the starting capital ratio minus the

minimum capital ratios in the CCAR 2018 supervisory quantitative assessment under the

severely adverse scenario or in any subsequent supervisory quantitative assessment conducted to

evaluate a resubmitted capital plan.

l.c. Minimum Requirement.

The applicable minimum requirement for each regulatory capital ratio. Specifically, for the line

1.c., column A, a 4.5 percent common equity tier 1 ratio; line 1.c., column B, a 6 percent tier 1

capital ratio; line 1.a., column C, a 4 percent tier 1 leverage ratio, and column D, an 8 percent

total capital ratio.

1. d Capital ratio denominator as of 12/31/2018.

The applicable denominator for each regulatory capital ratio using the standardized approaches

as reported on the FR Y-9C as of December 31,2018. Specifically, for line 1.d., column A, B,

and D, total risk-weighted assets (BHCAA223) and for line 1.d, column C, total assets for the

leverage ratio (BHCAA224). To align with the format ofthe FR Y-14A, this item is divided by

1,000 so as to be expressed in millions of dollars.

2. Adjusted CCAR 2018 additional distributable capital.

For each column equal to (Line 1.a -line 1.b -line 1.c)*(line 1.d/100)).

This is the amount of additional capital the firm could have distributed in CCAR 2018 or in any

subsequent quantitative assessment conducted to evaluate a resubmitted capital plan and

remained above minimum requirements.
3.

The capital ratio declines in line l.b. include the effect ofthe firm’s 2018 planned capital actions.

The sum ofthe additional distributable capital calculated in line 2 and the firm’s 2018 planned

capital actions comprise the maximum planned capital distributions that the firm can make for

the 2019 capital plan cycle without seeking approval from the Federal Reserve.

Lines 3.a, 3.b, and 3.c adjust for any changes to the firm’s planned capital actions for PQ1-6.

The firm’s 2018 PQ7-9 planned capital actions are assumed to be representative ofits 2019 PQ7-

9 planned capital actions.

For column A, common equity tier 1 planned capital actions are the sum of cash dividends

declared on common stock (CPSK4460), cash dividends declared on preferred stock

(CPSK4598), and total share repurchases (CPSDQ288) minus total issuance of common stock

(CPSDQ285).

For column B and C, tier 1 capital planned capital actions are the sum of common equity capital

actions in column A plus the amount recognized in regulatory capital from redemption or

repurchases ofnon-cumulative perpetual preferred stock (CACIY515) and other additional tier 1

instruments (CACIY527) minus issuance of non-cumulative perpetual preferred stock

(CACIY544) and other additional tier 1 instruments (CACIY556).

For column D, total capital planned capital actions are the sum oftier 1 capital actions in

columns B and C plus the amount recognized in regulatory capital from redemption or

repurchases ofsubordinated debt (CACIY528), cumulative dated preferred (TRUPS) instruments

(CACIY535), and tier 2 capital instruments issued by subsidiaries (CACIY529) minus issuance

ofsubordinated debt (CACIY557), cumulative dated preferred (TRUPS) instruments

(CACIY564), and tier 2 capital instruments issued by subsidiaries (CACIY558).

3.a. Planned capital actions PQ1-6 of CCAR 2018.

For each category ofregulatory capital, the firm’s planned capital actions for the first through

sixth quarters ofthe CCAR 2018 planning horizon.

3.b. Actual capital actions 2019:Q1.

The firm’s actual capital actions taken in 2019:Q1 as reported on the FR Y-9C and FR Y-14.

3. c. Approved planned capital actions 2019:Q2.

The firm’s capital distributions already included in the capital plan from the prior year and not

objected to by the Federal Reserve for that quarter, including any approved requests for

additional planned capital distributions.

4. 2019:Q3 - 2020:Q2 capital distribution capacity.

For each column equal to Line 2. + line 3.a -line 3.b -line 3.c.
This amount represents the amount of capital above each minimum requirement that the firm

could distribute and still remain adequately capitalized in the severely adverse scenario, based on

the CCAR 2018 supervisory quantitative assessment.

5. Maximum approved capital actions for 2019:Q3 - 2020:Q2.

This section computes the maximum net planned distributions approved for each category of

regulatory capital (i.e. common equity tier 1 capital, additional tier 1 capital, tier 2 capital) that

the firm can make for the period 2019:Q3 through 2020:Q2 without seeking approval from the

Federal Reserve. Each value is expressed in millions of dollars.

5.a. Net planned distributions from tier 2 capital.

Equal to line 4. Column D.

5. b Net planned distributions from additional tier 1 capital.

Equal to the minimum of:

• line 4. Column B;

• line 4. Column C; and

• line 4. Column D - net planned distributions from tier 2 capital.

5. c Net planned distributions from CETI capital.

Equal to the minimum of:

• line 4. Column A;

• line 4. Column B - net planned distributions from additional tier 1 capital;

• line 4. Column C - net planned distributions from additional tier 1 capital; and

• line 4. Column D - net planned distributions from additional tier1 capital and tier 2

capital.