Federal Reserve announces new capital ratios for large banks following stress test


The ratios are part of the new "stress capital buffer" regime established by the Fed, which allows the central bank to set custom capital requirements for each bank, depending on how severely each firm faced losses under the annual stress test.

WASHINGTON: The U.S. Federal Reserve announced on Thursday how much each large bank that underwent the most recent stress test will have to hold on their books as capital cushions.

The capital requirements for each of the 34 banks are based on how well each firm performed in the June test, and will take effect on Oct. 1. Goldman Sachs and Morgan Stanley were directed to hold the largest amount of capital to guard against losses, facing ratios of 13.4% and 13.2%, respectively.

The ratios are part of the new "stress capital buffer" regime established by the Fed, which allows the central bank to set custom capital requirements for each bank, depending on how severely each firm faced losses under the annual stress test.

The June results found that even in a severe downturn, banks would have more than enough capital to stay above regulatory minimums - a finding that led the Fed to lift restrictions on stock buybacks and dividend payouts that had been put in place at the beginning of the coronavirus pandemic.

The new capital requirement combines the 4.5% minimum capital ratio for all large banks with a custom stress capital buffer. HSBC's North American operation faced the largest such requirement, with the Fed ordering a 7.5% buffer.

The nation's largest firms also face a G-SIB surcharge of at least 1%, which scales up to 3.5% for JPMorgan Chase & Co, the nation's largest bank.- Reuters

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights
   

Next In Business News

CPO futures expected to trend lower on profit-taking next week
Britain looking at temporary measures to alleviate trucker shortage
'Loss and pain': Families testify at Dutch MH17 trial
Oil hits highest in almost 3 years as supply tightens
GLOBAL MARKETS-S&P 500 edges up, European shares slump amid Evergrande fears, US yields rise
Banking on wealth management
Short Position - Opcom, La Nina, Taxing
Going for growth
Sapura Energy in race against time
Ge-Shen hopeful of growth amid challenges

Stories You'll Enjoy


Vouchers