Federal Reserve Board announces individual capital requirements for all large banks, effective 5 August

Following its stress test earlier this year, the Federal Reserve Board today announced the individual capital requirements for all large banks, effective on October 1.

Large bank capital requirements are in part determined by the Board’s stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs. The “Large Banks Capital Requirements” table shows each bank’s total common equity tier 1 capital requirement, which is made up of several components, including:

  • The minimum capital requirement, which is the same for each firm and is 4.5 percent;
  • The stress capital buffer requirement, which is determined from the stress test results, and is at least 2.5 percent; and
  • If applicable, a capital surcharge 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.

If a bank’s capital dips below its total requirement announced today, the bank is subject to automatic restrictions on both capital distributions and discretionary bonus payments.

The Board also today affirmed the stress test results for two firms that requested reconsideration. Those firms are Bank of America Corporation and Huntington Bancshares Incorporated.

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 and revenues for banks under the hypothetical stress scenario, worked as intended and were consistent with the principles described in the Board’s Stress Testing Policy Statement.

/Public Release. This material from the originating organization/author(s) may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.