Fed Revises Dodd-Frank Stress Test Results
WASHINGTON The Federal Reserve Board revised its findings to the closely watched Dodd-Frank Act stress tests on Friday, citing inconsistencies in the treatment of some figures during its calculations.
The agency released the results of its 2014 stress tests on Thursday afternoon, with 29 of the 30 banks meeting the agency's minimum adequate capital threshold of 5%.
The revision affects the findings for 15 of the 30 institutions, though the Fed noted in a release that just four banks had more than a 0.1 percentage point change in either direction.
"The capital ratios were adjusted to address inconsistencies in the treatment of the fourth quarter 2013 actual capital actions and assumptions about preferred and employee compensation-related issuance over the course of the planning horizon," the agency said in release.
American Express Co., one of the leaders under the tests, fell to 12.1% ratio of tier 1 common capital to assets, down half a percentage point, while M&T bumped up to 6.2%, a 0.3 percentage point increase.
HSBC fell to 6.6%, a 0.2 percentage point decrease and Northern Trust Corp. rose to 11.7%, a 0.3 percentage point increase.
Zions, which posted the lowest minimum ratio 3.5% saw that figure rise 0.1 percentage point to 3.6%. The bank attributed its results in a statement Thursday evening to significantly higher commercial real estate losses, significantly greater risk-weighted assets and lower pre-tax, pre-provision revenue than anticipated.
"As a result of the Federal Reserve's stress tests, Zions will resubmit its capital plan to the Federal Reserve and anticipates that the resubmission will contain additional actions that will further reduce risk and/or increase its common equity capital sufficient to cause Zions' capital ratios to meet or exceed the minimum capital ratios under the Federal Reserve's hypothetical severely adverse economic stress scenario," the bank said.
Zions added that its original capital plan submission to the Fed took place before the sale of some of collateralized debt obligation holdings in January and February, which should further reduce its risk going forward.