Fed’s proposed SCB tweak would free $20bn of capital at US banks
Averaging of stress test-based inputs over two years would reduce current add-ons by up to 60bp
A proposal by US regulators to smooth out year-on-year fluctuations in large banks’ capital requirements would unlock $20.2 billion in capital, Risk Quantum analysis shows.
On April 17, the US Federal Reserve proposed revisions to its annual stress test framework, including linking a bank’s stress capital buffer (SCB) to the average Common Equity Tier 1 (CET1) capital depletion observed over the past two tests, rather than relying solely on the most recent results.
By applying the revised formula
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