The Fed Board announced in a statement the final individual capital requirements for all large banks.
The margins, which will take effect on October 1, are the result of the stress test conducted earlier this year, the Fed explained.
The capital requirements for large banks are based on the results of the Board’s stress test, which provides a risk-sensitive and forward-looking assessment of capital needs.
The Tier 1 capital requirements of each bank’s common equity, which is composed of several elements:
- The minimum capital requirement, which is the same for each bank and is 4.5 percent;
- The stress capital buffer requirement, which is based in part on the stress test results and is at least 2.5 percent; and
- If applicable, a capital surcharge for the largest and most complex banks, which is updated in the first quarter of each year to account for the overall systemic risk of each of these banks.
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.
Also, the Board announced that it had modified the stress capital buffer requirement for Goldman Sachs, after the firm’s request for reconsideration. Based on an analysis of additional information presented by the firm in its request, the Board determined it would be appropriate to adjust the treatment of particular historical expenses incurred by the bank in the stress testing models’ input data, due to the non-recurring nature of those expenses. As a result, the bank’s stress capital buffer requirement has been adjusted to 6.2 percent from a preliminary 6.4 percent.
The Board is focused on continuously improving the stress testing framework. To that end, the Board will analyze whether to revise regulatory reporting forms to better capture these types of data and to explore possible refinements to certain model components, the memo concludes.
