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Goldman, Morgan Stanley, Deutsche Hit With The Fed’s Highest Capital Requirements

Following its stress tests earlier this year, this morning the Fed announced individual large bank capital requirements which will become effective on October 1.

Somewhat counterintuitively the Fed unveiled that banks without major net interest income – such as Goldman and Morgan Stanley (as well as the usual foreign suspects such as Deutsche Bank and Credit Suisse) – would face the stiffest capital demands even though it emerged in recent quarters that balance sheet and loan exposure is in fact the biggest risk the US banking system currently faces.

As shown in the table below, the capital levels determined by the Fed’s most recent stress-test process, give Goldman Sachs the highest CET1 Capital Requirement target among domestic banks, with an overall capital minimum at 13.7% of risk-weighted assets, while Morgan Stanley is second with a target of 13.4%; JPMorgan Chase, the largest U.S. bank, will need to maintain 11.3% under the standards taking effect Oct. 1.  Among foreign-based lenders, Deutsche Bank AG is highest at 12.3%, with Credit Suisse Group AG at 11.4% and UBS Group AG at 11.2%.

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