US banks improve stress test projections
Gap between internal projections and the Fed's model outputs shrinks to 118 basis points
The largest banks in the US are doing a better job of estimating their post-stress capital ratios in the Federal Reserve’s stress tests – with one notable exception.
On average, the participating banks’ projected stressed Common Equity Tier 1 (CET1) capital ratios, under the severely adverse scenario, diverged from the Fed’s estimates by 118 basis points – a significant improvement on last year, when they misjudged the central bank’s models by 157bp.
The biggest outlier was Morgan Stanley
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