FED announces capital requirements for large banks

The US Federal Reserve Board (FED) announced the final individual capital requirements for all large banks, effective on October 01, 2024. These large bank capital requirements are informed by the FED-conducted stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs.

As per the announcement, each bank's common equity tier 1 capital requirement is made up of several components, including:

• The minimum capital requirement, which is the same for each bank and is 4.5%

• The stress capital buffer requirement, which is based in part on the stress test results and is at least 2.5%

• 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

The stress tests revealed that the largest US banks are still strong enough to handle a severe economic downturn, but their capital levels had weakened compared to the previous year. All 31 banks tested kept their capital above the minimum regulatory requirements, despite facing a scenario that included a severe global recession, a sharp decline in commercial real estate and home prices, and high unemployment rates. Below are the key highlights of the announced capital requirements for large banks:

• Deutsche Bank USA Corp. has the highest common equity tier 1 (CET1) capital requirement at 18.4% (up from 13.8% in 2023)

• CET1 capital requirement for Citigroup is at 2.1%, down from 12.3% the previous year.

• Goldman Sachs and Morgan Stanley were assigned the CET1 requirements of 13.7% and 13.5%, respectively, up from 13% and 12.9% in 2023. Goldman's required stress capital buffer has been adjusted to 6.2% after the bank issued the FED a request for reconsideration of its regulatory requirement.

• JPMorgan Chase is required to maintain CET1 capital of 12.3% while its G-SIB surcharge has been set to 4.5%, up from 4.0% in 2023.

Related links

• Press release

• Large bank capital requirements (PDF)

• Stress test results (PDF)