Fed Set Large Bank Required Capital

On Aug. 4, Fed issued individual capital requirements for large banks.

  • Fed announced the individual capital requirements for all large banks, from Oct. 2022.
  • Follows Fed Jun. 2022 results of the annual bank stress test for 2022, see #141521.
  • Large Bank Capital Requirements
  • In part, capital requirements of large banks, are determined by Fed stress test results.
  • Test results provide a risk-sensitive, and forward-looking, assessment of capital needs.
  • Table shows total Common equity tier 1 capital requirements for each of larger banks.
  • This include Minimum capital requirement, which is the same for each bank at 4.5%.
  • Stress capital buffer requirement, determined from stress test results, at least 2.5%.
  • If applicable, capital surcharge for Global systemically important banks (G-SIBs) of at least 1%, updated in 1st quarter each year, account for overall systemic risk of G-SIB.
  • Total CET1 capital requirement ranged from lowest level of 7%, up to 13.5% for banks.
  • If bank's capital dips below its total requirement announced in table, bank is subject to automatic restrictions on both capital distributions and discretionary bonus payments.
  • Reconsideration Process
  • Fed also affirmed stress test results for two firms that had requested reconsideration.
  • The firms that requested a review, were Bank of America and Huntington Bancshares.
  • Reconsideration involved independent group that analyzed and evaluated the results.
  • Results were checked for error and to ensure adequacy of the stress test model, which project the loan losses and revenues for banks under the hypothetical stress scenario.
  • Models worked as intended, and consistent with Fed Stress Testing Policy Statement.
  • Effectiveness
  • Individual capital requirements for all large banks become effective on Oct. 1, 2022.

Regulators Fed
Entity Types Bank; BHC; IHC; SIFI; Thrift
Reference Gd, PR, 8/4/2022
Functions C-Suite; Financial; Reporting; Risk; Treasury
Countries United States of America
Products Banking; Corporate; Equity; Loan
Regions Am
Rule Type Final
Rule Date 8/4/2022
Effective Date 10/1/2022
Rule Id 145033
Linked to Rule :141521
Reg. Last Update 8/4/2022
Report Section US Banking

Last substantive update on 08/05/2022