Morgan Stanley Appeals for Reconsideration of Stress Capital Buffer

While announcing the finalized Stress Capital Buffer (SCB) requirement and new capital ratios for the country’s largest banks, the Federal Reserve noted that Morgan Stanley MS is seeking reassessment.

As part of the annual stress test, the Fed evaluates banks’ performance under hypothetical scenarios and determines their SCB and other capital levels to provide cushion against losses during an economic downturn.
 
Morgan Stanley has asked for a downward adjustment to its SCB and is actively discussing the matter with the Fed. The bank’s final SCB will be declared by Sept. 30. The SCB becomes effective from Oct. 1 for a year and is subject to annual revision.

Currently, Morgan Stanley has a SCB of 6%, the highest among the banks tested. Following this year’s stress test, the company, based on the current regulatory standards, expected its SCB to be 5.1% between Oct. 1, 2025, and Sept. 30, 2026. Further, the bank noted that its common equity tier 1 (CET1) requirement will be 12.6%, down from the current 15%.

Morgan Stanley is not the only one seeking a revision to its SCB. Goldman Sachs GS and Wells Fargo WFC got their 2024 SCB revised down. Goldman’s SCB was reduced from 6.4% to 6.2%, while Wells Fargo’s buffer was lowered from 3.8% to 3.7%.

Morgan Stanley’s Zacks Rank & Price Performance

Over the past six months, Morgan Stanley’s shares have gained 16.5%, compared with the industry’s 17.1% growth.

Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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