No change in large bank capital requirements, Fed announces; corrected stress test data for two big banking companies released

For the second straight year, large bank capital requirements will remain unchanged at 4.5% effective Oct. 1, the Federal Reserve said Thursday.

Also Thursday, the Fed released corrected stress test results for two large banks, as the banks had previously submitted incorrect data, the Fed alleged.

The large bank capital requirements are in part determined by the annual stress test results, which the Fed announced July 3. The stress tests, the agency said, provide a risk-sensitive and forward-looking assessment of capital needs.

The capital requirement announced Thursday is unrelated to the proposal also issued that day by the federal banking agencies, which proposes stricter capital requirements.

The total common tier 1 capital requirement as of Oct. 1 (unchanged from last year) as a result of the stress tests, the Fed said, includes:

  • The minimum capital requirement, which is the same for each firm and is 4.5%;
  • The stress capital buffer requirement, which is determined from the stress test results, and is at least 2.5%; and
  • A capital surcharge (If applicable) for global systemically important banks (G-SIBs), which is updated in the first quarter of each year to account for the overall systemic risk of each G-SIB.

The Fed noted that, under the rules, if a bank’s capital dips below the total requirements announced Thursday, the bank is subject to automatic restrictions on both capital distributions and discretionary bonus payments. The Fed reported that it received no requests for reconsideration from any bank.

Meanwhile, the Fed announced that it had released corrected stress test results for Bank of America Corp. and The Bank of New York Mellon Corp. The revised results were released after the Fed determined the two banks had submitted incorrect stress test outcomes.

The Fed said the revisions from the incorrect submissions do not result in a change to either bank’s stress capital buffer requirement. In its review of these banks’ data, the Fed said it conducted reviews of the other banks that underwent the stress test and found no errors in their submissions.

Federal Reserve Board announces the individual capital requirements for all large banks, effective on October 1