• Fed sets new individual capital requirements effective Oct 1
• Morgan Stanley asks to cut its stress capital buffer
• Decision on Morgan Stanley due by Sept 30
• CET1 stack blends 4.5 percent minimum, SCB, and G-SIB surcharge
• Deutsche Bank tops CET1 list at 16 percent
• Citi at 11.6 percent, JPMorgan at 11.5 percent
• Goldman set at 10.9 percent, Bank of America at 10 percent
• All 22 banks cleared June stress tests and stayed above minimums
• Fed proposes two year averaging to reduce volatility in buffers
• Additional proposals target leverage ratio and supervisory ratings

The Federal Reserve on Friday outlined new bank-by-bank capital requirements for the largest U.S. lenders, following results of this year’s stress tests. The rules take effect Oct. 1, marking another turn in the post-crisis capital regime.

Morgan Stanley has requested a reduction in its stress capital buffer, and the Fed said it will decide and publish the bank’s final requirement by Sept. 30. 

The New York firm said it remains engaged with the central bank to reach a final figure before the new standards begin.

Challenges to stress capital buffers are not new. Last year Goldman Sachs successfully sought a modest reduction, with its buffer moving from 6.4% to 6.2% and later to 6.1%. 

Morgan Stanley, in a recent filing, said it expects its common equity tier 1 ratio based on this year’s test to be 12.6%, down from a 13.5% requirement last year.

If a bank’s capital falls below its total requirement, the Fed noted, it may face limits on dividends, buybacks, and discretionary bonus payments. The CET1 stack combines a 4.5% minimum, a stress capital buffer of at least 2.5%, and for the most complex institutions a surcharge updated in the first quarter each year.

Among major banks, Deutsche Bank’s upcoming CET1 requirement is the highest at 16%. Citigroup follows at 11.6%, with JPMorgan Chase close behind at 11.5%. Goldman Sachs is set at 10.9% - down from 13.6% last year - while Bank of America stands at 10%.

June’s stress tests found all 22 firms would remain above minimums and continue lending in a severe recession, though this year’s scenario was less punishing than last year’s. 

In April the Fed proposed averaging stress test outcomes over two years to reduce swings in capital demands. If finalized, the 2025 results would be averaged with 2024 and published separately from the annual test.

Fed Vice Chair for Supervision Michelle Bowman called the newly announced requirements a “period of transition” as the Board works to reduce year-over-year volatility and increase transparency. 

She said finalizing the two-year averaging rule would be an important next step, allowing revised stress buffers to reflect averaged results.

The capital overhaul sits alongside other pending changes. The Fed has proposed updates to the enhanced supplementary leverage ratio and to the supervisory rating framework for big banks - moves that could further reshape the largest lenders’ balance sheet and risk incentives.