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    FED Announces Capital Requirements for Large Banks

    August 05, 2021

    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.

     

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    Keywords: Americas, US, Banking, Large Banks, Regulatory Capital, Stress Testing, Basel, SCB, G-SIBs, FED

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