Fed announces new capital levels for large banks, Morgan Stanley appealing result

By Pete Schroeder

WASHINGTON (Reuters) -The U.S. Federal Reserve announced on Friday that it had finalized new capital levels of the nation’s largest banks following the June stress tests, although it added that Morgan Stanley (N:MS) is seeking reconsideration of its upcoming capital level.

The central bank added that the new capital requirements, which take effect on Oct. 1, would be updated should the Fed adopt a proposal to average the results of two years of stress tests.

Under the annual stress test of large bank finances, the Fed examines how banks would perform under a hypothetical economic downturn, and sets their capital cushions in line with how severe their losses would be.

Morgan Stanley is requesting reconsideration of its result, and the Fed will announce its decision by the end of September.

The bank said in a statement that it had sought a downward adjustment to its “stress capital buffer” and was “actively engaged” with the Fed on the matter.

Neither the Fed nor the bank disclosed details regarding the bank’s potential buffer, but in 2024 Morgan Stanley was given a buffer of 6%, which was among the highest of the banks tested.

In 2024, Goldman Sachs successfully appealed its buffer, lowering it from 6.4% to 6.2%.