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Morgan Stanley Appeals for Reconsideration of Stress Capital Buffer
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Key Takeaways
The Fed set new capital levels for major banks following the June stress tests.
Morgan Stanley appealed for a lower stress capital buffer, and the decision is due on Sept. 30.
MS expected its CET1 requirement to drop to 12.6% from the current 13.5% based on recent test results.
While announcing the finalized Stress Capital Buffer (SCB) requirement and new capital ratios for the country’s largest banks, the Federal Reserve noted that Morgan Stanley (MS - Free Report) is seeking reassessment.
As part of the annual stress test, the Fed evaluates banks’ performance under hypothetical scenarios and determines their SCB and other capital levels to provide cushion against losses during an economic downturn.
Morgan Stanley has asked for a downward adjustment to its SCB and is actively discussing the matter with the Fed. The bank’s final SCB will be declared by Sept. 30. The SCB becomes effective from Oct. 1 for a year and is subject to annual revision.
Currently, Morgan Stanley has a SCB of 6%, the highest among the banks tested. Following this year’s stress test, the company, based on the current regulatory standards, expected its SCB to be 5.1% between Oct. 1, 2025, and Sept. 30, 2026. Further, the bank noted that its common equity tier 1 (CET1) requirement will be 12.6%, down from the current 15%.
Morgan Stanley is not the only one seeking a revision to its SCB. Goldman Sachs (GS - Free Report) and Wells Fargo (WFC - Free Report) got their 2024 SCB revised down. Goldman’s SCB was reduced from 6.4% to 6.2%, while Wells Fargo’s buffer was lowered from 3.8% to 3.7%.
Morgan Stanley’s Zacks Rank & Price Performance
Over the past six months, Morgan Stanley’s shares have gained 16.5%, compared with the industry’s 17.1% growth.
Image: Bigstock
Morgan Stanley Appeals for Reconsideration of Stress Capital Buffer
Key Takeaways
While announcing the finalized Stress Capital Buffer (SCB) requirement and new capital ratios for the country’s largest banks, the Federal Reserve noted that Morgan Stanley (MS - Free Report) is seeking reassessment.
As part of the annual stress test, the Fed evaluates banks’ performance under hypothetical scenarios and determines their SCB and other capital levels to provide cushion against losses during an economic downturn.
Morgan Stanley has asked for a downward adjustment to its SCB and is actively discussing the matter with the Fed. The bank’s final SCB will be declared by Sept. 30. The SCB becomes effective from Oct. 1 for a year and is subject to annual revision.
Currently, Morgan Stanley has a SCB of 6%, the highest among the banks tested. Following this year’s stress test, the company, based on the current regulatory standards, expected its SCB to be 5.1% between Oct. 1, 2025, and Sept. 30, 2026. Further, the bank noted that its common equity tier 1 (CET1) requirement will be 12.6%, down from the current 15%.
Morgan Stanley is not the only one seeking a revision to its SCB. Goldman Sachs (GS - Free Report) and Wells Fargo (WFC - Free Report) got their 2024 SCB revised down. Goldman’s SCB was reduced from 6.4% to 6.2%, while Wells Fargo’s buffer was lowered from 3.8% to 3.7%.
Morgan Stanley’s Zacks Rank & Price Performance
Over the past six months, Morgan Stanley’s shares have gained 16.5%, compared with the industry’s 17.1% growth.
Image Source: Zacks Investment Research
Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.