Corporate Finance

The Fed Approves Capital Plans of 30 Banks

But Morgan Stanley and Deutsche Bank are asked to resubmit their plans.
Christopher HosfordJuly 5, 2016

The Federal Reserve Board, in its most recent report of capital adequacy of major U.S. banks, approved the capital plans of 30 bank holding companies. However, the Fed objected to the plans of two banks, including Deutsche Bank.

Plans approved by the Fed under its Comprehensive Capital Analysis and Review (CCAR) program include those of American Express Co., BancWest Corp., Bank of America, The Bank of New York Mellon, Capital One Financial Corp., Discover Financial Services, Fifth Third Bancorp, Goldman Sachs Group, HSBC North America Holdings, SunTrust Banks, TD Group, U.S. Bancorp, Wells Fargo, and others, all of which met minimum capital requirements.

The Federal Reserve objected to the capital plans of Deutsche Bank and Santander Holdings USA because of “qualitative” factors. It didn’t specify them, but such factors that the Fed takes into account include the strength of governance practices, internal controls, and risk management.

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The Fed also said it would require Morgan Stanley to submit a new plan by year-end because of perceived weaknesses in its capital planning processes, even though it did not formally object to the bank’s plan.

“Over the six years in which CCAR has been in place, the participating firms have strengthened their capital positions and improved their risk-management capacities,” CCAR board governor Daniel Tarullo said. “Continued progress in both areas will further enhance the resiliency of the nation’s largest banks.”

Since the financial crisis that began in 2008, U.S. banks have been significantly increasing their capital. Among the bank holding companies assessed by CCAR, the common equity capital ratio — comparing risk-weighted assets to high-quality capital — has almost doubled since the first quarter of 2009, from 5.5% to 12.2%, reflecting an increase of more than $700 billion in common equity capital.