What is The Current State of Bank Capital in The U.S.?

Bank capital levels in the U.S. remain at all-time highs and banks are a source of strength ready to lend to American consumers and businesses in good times and in bad times. In fact, U.S. capital requirements are already among the highest in the world and well in excess of minimum international standards defined in the Basel III Accord.

While some have indicated that recent dips in the capital ratios of some of the largest banks call for regulatory action, the July 26-27, 2022 Minutes of the Federal Open Market Committee has correctly attributed these declines to higher volatility, interest rate increases and loan growth. One important factor not mentioned in the FOMC minutes, was the introduction of higher capital requirements for counterparty risk (SA-CCR) at the start of 2022.

Here are the Facts:

Fact #1:
Taking a longer view, the dip in the common equity tier 1 capital ratio of the largest banks is immaterial across the longer time series.


Fact #2:
The most recent stress tests increased the capital requirements of the largest banks by 60 basis points (between 80- and 100-basis points for the largest 3 banks). Learn More >>


Fact #3:
Capital requirements of the largest banks have increased approximately 25% over the past two years due to higher risk-weighted assets, and increases in the SCB and GSIB surcharge. Learn More >> 


Fact #4:
The capital requirements of the U.S. largest banks are already among the highest in the world and estimated to be 1.7x higher than the minimum international standards defined in the Basel III Accord due to the Collins Amendment, stress tests, and gold-platting of the GSIB surcharge.


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