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 use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards
The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.
The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024.
The U.S. President Joe Biden signed an Executive Order, dated October 30, 2023, to ensure safe, secure, and trustworthy development and use of artificial intelligence (AI).
The Monetary Authority of Singapore (MAS) launched an integrated digital platform, Gprnt, also known as “Greenprint.”
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The Network for Greening the Financial System (NGFS) published its latest set of long-term climate macro-financial scenarios (Phase IV) for assessing forward-looking climate risks.