Federal Reserve Board – Federal Reserve Board announces final individual capital requirements for large banks, effective on October 1

Following its stress test earlier this year, the Federal Reserve Board on Friday announced final individual capital requirements for large banks, effective on October 1. Large bank capital requirements are informed by the Board’s stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs.

In April, the Board proposed a rule to average stress test results over two consecutive years to reduce year-over-year volatility from the stress test when calculating a firm’s capital requirement. If the Board finalizes the rule as proposed, this year’s stress test results will be averaged with those from 2024, and updated capital requirements will be published separately.

“As the Board continues to fulfill its commitment to reducing year-over-year volatility and increasing transparency of the stress test, the individual capital requirements announced today represent a period of transition,” Vice Chair for Supervision Michelle W. Bowman said. “Finalizing the rule proposed in April would be an important next step to reducing year-over-year volatility in bank capital requirements. This would allow the Board to publish revised stress capital buffer requirements once the rule is finalized, based on averaged stress test results.”

The table in the attached document shows each bank’s common equity tier 1 capital requirement, which is made up of several components, including:

• 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.

The individual capital requirements published today do not include a stress capital buffer requirement for Morgan Stanley, as the firm requested reconsideration to reduce this requirement. The Board is reviewing the request to reduce the firm’s stress capital buffer requirement and expects to make its decision and publish, by September 30, 2025, Morgan Stanley’s final individual capital requirement.

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