New capital requirements for largest banks range from 13.7% to 7%; 11 must hold 10% or more

Individual capital requirements ranging from 13.7% to 7% for the 34 largest U.S. banks, effective Oct. 1, were released Monday by the Federal Reserve, with Goldman Sachs and Morgan Stanley at the top of the list.

The Fed said the large bank capital requirements – which affect banks with more than $100 billion in assets and average 8.89%, with 8.5% at the median – were based partially on stress test results from earlier this year. The so-called “common equity tier 1 (CET1)” capital requirements, the agency said, are made up of components that include:

  • Minimum capital requirements of 4.5% (which each financial firm must meet);
  • Stress capital buffer (SCB) at least 2.5% (based on stress test results);
  • Capital surcharge of at least 1% for global systemically important banks (GSIBs); only eight firms are subject to the surcharge, which averages 2.38%.

The top five banking firms in terms of CET1 capital requirements are: Goldman Sachs Group, Inc. (13.7%); Morgan Stanley (13.4%); DB (DeutscheBank) USA Corp. (12.3%); Credit Suisse Holdings USA, Inc. (11.4%); and JPMorgan Chase & Co. (11.3%). Those requirements include GSIB surcharges for three of those banks: Goldman (2.5%), Morgan Stanley (3%) and JPMorgan Chase (3.5%, the highest GSIB surcharge).

Other large banks whose CET1 included the GSIB surcharge are Citigroup Inc. (3%), Bank of America (2.5%), Wells Fargo & Co. (2%), Bank of New York Mellon Corp. (1.5%) and State Street Corp. (1%).

The five banks with the largest stress capital buffers, according to the Fed, are: DB USA (7.8%), Credit Suisse Holdings (6.9%); UBS Americas Holdings LLC (6.7%); Goldman Sachs (6.7%); and BNP Paribas USA, Inc. (6.4%).

Also Monday, the Fed said that it had affirmed stress test results for five firms that requested reconsideration of their scores: BMO Financial Corp., Capital One Financial Corp., Citizens Financial Group, Inc., Goldman Sachs., and Regions Financial Corp.

In a release, the Fed pointed out that capital buffers such as the SCB and GSIB surcharge are different from minimum capital requirements.

The agency also said it supports banking organizations that choose to use their capital buffers to lend to households and businesses and “undertake other supportive actions in a safe and sound manner. “When using their buffers, banking organizations may make capital distributions up to prescribed limits, which include automatic limitations in the capital framework, as well as any additional limitations determined by the Board,” the agency said.

Federal Reserve Board announces individual large bank capital requirements, which will be effective on October 1

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