FED Announces Capital Requirements for Large Banks
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.
Related Links
Keywords: Americas, US, Banking, Large Banks, Regulatory Capital, Stress Testing, Basel, SCB, G-SIBs, FED
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
APRA Revises Prudential Standard on Capital AdequacyRelated Articles
APRA Issues Interim Update to Policy Priorities for 2021 and Beyond
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
EC Adopts Solvency II and Resolution Rules Package for Insurers
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
OCC Issues Booklets on Regulatory Reporting and Earnings
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
ECB Sets Out Results of Economy-Wide Climate Stress Tests
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
EBA Examines Implications of Increasing Use of Digital Platforms in EU
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
