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
Previous ArticleBundesbank Publishes Deactivated Validation Rules for Reporting
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.