FED – FED releases corrected stress test results stemming from an error in projected trading losses & as a result, revised the capital requirements for two banks


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September 04, 2020

FED releases corrected stress test results stemming from an error in projected trading losses & as a result, revised the capital requirements for two banks

For release at 11:00 a.m. EDT

The FED on Friday released corrected stress test results stemming from an error in projected trading losses & as a result, revised the capital requirements for two banks. The Board identified the error & all results affected by it, corrected those results, & implemented changes to prevent similar errors in the future.

The loss rates for certain public welfare investments made by large banks were initially miscalculated, resulting in an overestimation of hypothetical losses for those investments. The error affected five banks: Citigroup Inc., The Goldman Sachs Group Inc., HSBC North America Holdings Inc., Morgan Stanley, & Wells Fargo & Company. The resulting common equity tier 1, or CET1, capital requirements for three firms were unaffected, while the CET1 capital requirements for two firms were revised. The updated CET1 requirements for the five firms are listed in the table below. The related stress test results documents have also been updated.

In its review of the loss models used for certain public welfare investments, the Board identified other model components that were similarly implemented & has conducted additional reviews, which found no further implementation errors.

BankPrevious CET1 Capital RequirementRevised CET1 Capital Requirement
Citigroup Inc.10.0%10.0%
(unchanged)
The Goldman Sachs Group, Inc.13.7%13.6%
HSBC North America Holdings Inc.10.2%10.2%
(unchanged)
Morgan Stanley13.4%13.2%
Wells Fargo & Company9.0%9.0%
(unchanged)

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Last Update:

September 04, 2020

Source: Federal Reserves

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