Fed maintains 4.5% minimum capital requirement for large banks, with stress capital buffer of at least 2.5%

The minimum capital requirement for large banks again will be 4.5%, with a stress capital buffer requirement of at least 2.5%, the Federal Reserve said late Wednesday. The requirements are effective Oct. 1.

This the third straight year the agency has kept the minimum requirement at the 4.5%  level.

The individual capital requirements are based on stress test results released earlier this year, the Fed said in a release. If a bank’s capital dips below its total requirement , the agency said, the bank is subject to automatic restrictions on both capital distributions and discretionary bonus payments.

In addition to the minimum capital requirement and the stress capital buffer – together totaling at least a 7% capital obligation for all large banks – a capital surcharge for the largest and most complex banks is required where applicable. That surcharge is updated in the first quarter of each year to account for the overall systemic risk of each of these banks, the Fed noted.

In other action, the Fed said it modified the stress capital buffer requirement to 6.2% for Goldman Sachs, after the firm’s request for reconsideration. The capital buffer mark had been 6.4%.

According to the agency, the bank provided additional information in asking for reconsideration of the buffer requirement. The Fed said that, after its analysis, “it would be appropriate to adjust the treatment of particular historical expenses incurred by the bank in the stress testing models’ input data, due to the non-recurring nature of those expenses.”

Federal Reserve Board announces final individual capital requirements for all large banks, effective on October 1