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.
- Individual capital requirements for all large banks become effective on Oct. 1, 2022.
||Bank; BHC; IHC; SIFI; Thrift
||Gd, PR, 8/4/2022
||C-Suite; Financial; Reporting; Risk; Treasury
||United States of America
||Banking; Corporate; Equity; Loan
|Reg. Last Update
Last substantive update on 08/05/2022