The Federal Reserve Board—also known as FED—announced the individual capital requirements for 34 large banks and these requirements become effective on October 01. Large bank capital requirements are in part determined by the FED's stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs. The capital requirements follow FED's stress tests earlier this year and are intended to ensure that the large banks tested will hold roughly USD 1 trillion in high-quality capital—enough to survive a severe recession and still be able to lend to households and businesses.
The total common equity tier 1, or CET1, capital requirements for each bank is made up of several components, including the following:
- Minimum capital requirement, which is the same for each firm and is 4.5%
- The stress capital buffer, or SCB, requirement, which is determined from the stress test results, and is at least 2.5%
- If applicable, a capital surcharge for global systemically important banks, or G-SIBs, which is at least 1.0%.
FED also affirmed the stress test results for one bank that requested reconsideration, HSBC North America Holdings Inc. The reconsideration process involved an independent group—separate from the stress testing group—that analyzed and evaluated the results. While affirming HSBC's stress test results for this cycle, FED directed the staff to conduct a closer examination of issues raised in the reconsideration process to inform continuing improvements in its stress testing methodology for next year's stress tests.
Keywords: Americas, US, Banking, Large Banks, Regulatory Capital, Stress Testing, Basel, SCB, G-SIBs, FED
Previous ArticleAPRA Revises Prudential Standard on Capital Adequacy
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.