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What's the current state of those capital requirements in US banks? Is this the latest requirement? https://www.federalreserve.gov/newsevents/pressreleases/bcr

What's the current state of those capital requirements in US banks? Is this the latest requirement? https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210805a.htm https://www.federalreserve.gov/newsevents/pressreleases/bcre... (4.5%) And how do banks actually measure up to this minimum?

tick_tock_tick 4y ago
The Fed runs stress tests all the time and currently the banks are preforming perfectly during them.
- Jon_Lowtek 4y ago
  which means the tests are not stressing. That is a good thing as they test for conditions that previously resulted in crashes. But it could also be a bad thing if the banks adapted to formally pass tests while straining their business with schemes that are overlooked
  - bobthepanda 4y ago
    We do know, at least from the last crisis, that so far the US stress tests have been effective at accurately gauging bank strength. (This is in contrast to the ECB stress tests during the Euro crisis, where repeatedly banks that had passed a stress test ended up needing bailouts or falling over.)
  - e63f67dd-065b 4y ago
    The conclusion during COVID was that the stress tests were too stringent and COVID was much better for the banks than worst case stress tests. Basically stress tests simulate large drops in asset values, but during COVID the trading desks made bucketloads of money when volatility was high. The financial sector is pretty resilient these days, the risky stuff mostly moved off bank balance sheets into private funds not subject to the same regulatory requirements.
NovemberWhiskey 4y ago
The 4.5% is the baseline; subject to additional stress capital buffer (based on DFAST supervisory stress-test results) and systematically-important institution weighting. https://www.federalreserve.gov/publications/large-bank-capital-requirements-20210805.htm https://www.federalreserve.gov/publications/large-bank-capit... So JP Morgan is 11.2%; Citigroup is 10.5%; for example.

tick_tock_tick 4y ago

The Fed runs stress tests all the time and currently the banks are preforming perfectly during them.

Jon_Lowtek 4y ago
which means the tests are not stressing. That is a good thing as they test for conditions that previously resulted in crashes. But it could also be a bad thing if the banks adapted to formally pass tests while straining their business with schemes that are overlooked
- bobthepanda 4y ago
  We do know, at least from the last crisis, that so far the US stress tests have been effective at accurately gauging bank strength. (This is in contrast to the ECB stress tests during the Euro crisis, where repeatedly banks that had passed a stress test ended up needing bailouts or falling over.)
- e63f67dd-065b 4y ago
  The conclusion during COVID was that the stress tests were too stringent and COVID was much better for the banks than worst case stress tests. Basically stress tests simulate large drops in asset values, but during COVID the trading desks made bucketloads of money when volatility was high. The financial sector is pretty resilient these days, the risky stuff mostly moved off bank balance sheets into private funds not subject to the same regulatory requirements.

NovemberWhiskey 4y ago

The 4.5% is the baseline; subject to additional stress capital buffer (based on DFAST supervisory stress-test results) and systematically-important institution weighting. https://www.federalreserve.gov/publications/large-bank-capital-requirements-20210805.htm https://www.federalreserve.gov/publications/large-bank-capit... So JP Morgan is 11.2%; Citigroup is 10.5%; for example.