The Federal Reserve Board has announced final individual capital requirements for large banks, which will take effect on October 1. These requirements are based on the results of the Board’s most recent stress test, which assesses the ability of banks to withstand economic downturns and ensures that capital levels are sufficient in a range of scenarios.

Earlier this year, the Board proposed a rule that would average stress test results over two consecutive years. This approach aims to reduce fluctuations in capital requirements from year to year. If implemented as proposed, the results from this year's stress test would be averaged with those from 2024. The updated capital requirements would then be published separately.

Vice Chair for Supervision Michelle W. Bowman said, "As the Board continues to fulfill its commitment to reducing year-over-year volatility and increasing transparency of the stress test, the individual capital requirements announced today represent a period of transition. Finalizing the rule proposed in April would be an important next step to reducing year-over-year volatility in bank capital requirements. This would allow the Board to publish revised stress capital buffer requirements once the rule is finalized, based on averaged stress test results."

Each bank's common equity tier 1 capital requirement is composed of several elements and is detailed in a table provided by the Federal Reserve Board. If a bank's capital falls below its required level, it will face automatic restrictions on both dividend payments and discretionary bonuses.

Morgan Stanley was not assigned a new stress capital buffer requirement at this time because it has requested reconsideration to lower its requirement. The Board is currently reviewing Morgan Stanley’s request and expects to announce its decision by September 30, 2025.