FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020. The minimum capital requirements for a large bank comprise the minimum capital requirements, the stress capital buffer, and, if applicable, a capital surcharge for global systemically important banks, or G-SIBs. As per the announcement, the minimum common equity tier 1 capital ratio is the same for all banks at 4.5% and the stress capital buffer, which is determined from the stress test results, ranges from 2.5% to 7.8%. Finally, the G-SIB surcharge that has been prescribed for eight banks ranges from 1% for State Street Corporation to 3.5% for JPMorgan Chase & Co. Overall, Goldman Sachs Group, Inc. and Morgan Stanley have the highest capital requirements at 13.7% and 13.4%, respectively.
FED also affirmed the stress test results for five firms that requested reconsideration. Those firms are BMO Financial Corporation, Capital One Financial Corporation, Citizens Financial Group, Inc., The Goldman Sachs Group Inc., and Regions Financial Corporation. The reconsideration process involved an independent group—separate from the stress testing group—that analyzed and evaluated the results. The results were checked for errors and to ensure that the stress test models, which project the loan losses for banks, worked as intended and were consistent with the stress test framework of FED. As FED is done with input gained from a variety of stakeholders and events, including its annual stress test model symposium, FED will assess the information learned from the reconsideration process and use it to continue improving its stress testing methodology.
Related Link: Press Release
Effective Date: October 01, 2020
Keywords: Americas, US, Banking, Regulatory capital, CET1, Stress Capital Buffer, G-SIB Surcharge, Stress Testing, Basel, FED
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