Supervisory Stress Test Results
This section describes the Federal Reserve's projections of losses, revenues, expenses, and capital positions for the 33 firms in the December stress test under the severely adverse and alternative severe scenarios. Results are presented both in the aggregate and for individual firms. The aggregate results reflect the sensitivities of losses, revenues, and capital at these firms as a group to the stressed economic and financial market conditions contained in those scenarios. The range of results across individual firms reflects differences in business focus, asset composition, revenue and expense sources, and portfolio risk characteristics. The comprehensive results for individual firms are reported in appendix B.
Changes in supervisory stress test results across exercises reflect changes in
- firm starting capital positions;
- scenarios used for the supervisory stress test;
- portfolio composition and risk characteristics; and
- models used in the supervisory stress test.
While the results under the two scenarios described here are approximately similar, there are differences designed to reflect a broad set of severe but plausible risks. Generally, the alternative severe scenario exhibits a smaller initial decrease in economic activity but a more sluggish recovery relative to the severely adverse scenario. The different scenario paths lead to slightly larger PPNR and trading revenue projections under the severely adverse scenario as equity asset values recover faster. Additionally, the faster recovery leads to lower loan losses and lower provision expenses over the full 13 quarters under the severely adverse scenario. In the aggregate, each of the five capital and leverage ratios declines similarly but subsequently rises more under the severely adverse scenario.
Severely Adverse Scenario
Under the supervisory severely adverse scenario, the aggregate CET1 ratio is projected to decline to a minimum of 9.6 percent before rising to 10.2 percent at the end of nine quarters (see table 3). In the aggregate, each of the five capital and leverage ratios declines over the course of the projection horizon from their second quarter of 2020 levels, with third quarter of 2022 levels ranging from 1.2 percentage points to 2.2 percentage points lower than at the start of the projection horizon (see table 3).
The changes in post-stress capital ratios vary considerably across firms (see figure 11), and table 4 presents these ratios for each of the 33 firms. Differences in the declines in ratios across firms are primarily related to differences in the Federal Reserve's projections of losses, revenues, and expenses.
Projected Losses
The Federal Reserve projects that the 33 firms as a group would experience significant losses on loans and other positions under the severely adverse scenario. In this scenario, losses are projected to be $629 billion for the 33 firms in the aggregate over the nine quarters of the projection horizon.
These losses include
- $514 billion in accrual loan portfolio losses;
- $4 billion in securities losses;38
- $95 billion in trading and counterparty losses at the 13 firms with substantial trading, processing, or custodial operations; and
- $16 billion in additional losses from items such as loans booked under the FVO (see table 3).
Losses on accrual loan portfolios account for 82 percent of the projected losses for the 33 firms, while trading and counterparty losses account for 15 percent (see figure 10).
Figure 10. Projected losses in the severely adverse scenario
Loan Losses
Total loan losses are $514 billion for the 33 firms in the December stress test. For the same firms, total loan losses were $433 billion in the June stress test.
Loan losses on consumer products (domestic residential mortgages, domestic junior liens and HELOCs, credit cards, and other consumer loans) represent a slightly smaller share of losses than losses on commercial products (domestic CRE, C&I loans, and other loans) (see table 3). Consumer and commercial products represent 38 and 44 percent of total projected losses, respectively. C&I loan losses and credit card losses are the two largest categories of loan losses at $121 billion and $158 billion, respectively.
The aggregate nine-quarter cumulative loss rate for all accrual loan portfolios is 7.7 percent, where the loss rate is calculated as total projected loan losses over the nine quarters of the projection horizon divided by average loan balances over the horizon. However, total loan loss rates vary significantly across firms, ranging between 1.7 percent and 21.3 percent across these institutions (see table 8 and figure 12).
Firms' loan loss rates reflect differences in the portfolios held by each firm and the characteristics of the loans within each portfolio. Loan portfolio composition matters because projected loss rates vary significantly for different types of loans. In the aggregate, nine-quarter cumulative loss rates vary from 2.1 percent on domestic first-lien mortgages to 22.3 percent on credit cards, reflecting both differences in typical performance of these loans and differences in the sensitivity of different types of loans to the scenarios. In particular, lending categories for which performance is sensitive to credit spreads or unemployment rates may experience high stressed loss rates due to the considerable stress on these factors in the severely adverse and alternative severe scenarios.39
Projected loss rates on most loan categories show similar dispersion across firms (see table 8 and figures C.1 through C.7). There are significant differences across firms in the projected loan loss rates for similar types of loans. For example, while the median projected loss rate on C&I loans is 7.3 percent, the rates among firms with C&I loans vary from a low of 1.2 percent to a high of 27.0 percent. For credit card loans, the range of projected loss rates is from 13.3 percent to 35.8 percent, with a median of 23.7 percent.
Differences in projected loss rates over time primarily reflect changes in loan and borrower characteristics and changes in the scenarios. The overall loan loss rate in the December stress test is higher than the June stress test due to the generally higher projected loss rates across portfolios, with larger increases for severely affected portfolios such as CRE. The increase in risk was offset somewhat by a shift in the composition of firms' loan portfolios away from portfolios with higher loss rates. In particular, consumer credit card balances have declined significantly since the start of the year as a result of reduced consumer spending and higher loan repayment rates.
Losses on Trading, Private Equity, SFT, and Derivatives Positions
The severely adverse scenario results include $95 billion in trading and counterparty losses generated from the global market shock and LCPD components. For the 13 firms subject to one or both components, losses ranged from $0.9 billion to $23 billion (see table 6).
The relative size of losses across firms depends on the specific risk characteristics of each firm's trading positions, inclusive of hedges. Importantly, these projected losses are based on the trading positions and counterparty exposures held by these firms on the same as-of date (June 30, 2020) and could have differed if they had been based on a different date.
Projected PPNR
In the aggregate, the 33 firms are projected to generate $371 billion in PPNR cumulatively over the nine quarters of the projection horizon, equal to 2.0 percent of their combined average assets (see table 3). PPNR projections are driven by the shape of the yield curve, the path of asset prices, equity market volatility, and measures of economic activity in the severely adverse scenario. In addition, PPNR projections incorporate expenses stemming from estimates of elevated levels of losses from operational-risk events such as fraud, employee lawsuits, litigation-related expenses, or computer system or other operating disruptions.40 In aggregate for the 33 firms, operational-risk losses are $160 billion for the December stress test. For the June stress test, operational-risk losses were $144 billion.
Aggregate PPNR as a percent of combined average assets is lower under the severely adverse scenario in the December stress test than in the June stress test. Lower PPNR is partly due to lower net interest income, reflecting a sharper decrease in the term spread under the severely adverse scenario. There were also fairly sizable changes in firms' balance sheets between December 2019 and June 2020. All else equal, larger balance sheets result in higher revenue that is roughly offset by higher expenses in the stress test projections. Noninterest income remained higher than in the June stress test, supported by stronger trading revenues and investment banking fees. Stronger noninterest income partly dampened the decrease in PPNR.
The ratio of projected cumulative PPNR to average assets varies across firms (see figure 13). A significant portion of this variation reflects differences in business focus across the institutions. For instance, the ratio of PPNR to assets tends to be higher at firms focusing on credit card lending, reflecting the higher net interest income that credit cards generally produce relative to other forms of lending.41 Importantly, lower PPNR rates do not necessarily imply lower net income, because the same business focus and revenue risk characteristics determining differences in PPNR across firms could also result in offsetting differences in projected losses across firms.
Net Income and Regulatory Capital Treatment
Projected PPNR and provisions for loan losses are the primary determinants of projected pre-tax net income. The projected decline in pre-tax net income is 0.9 percent of average total assets, compared to a decline of 1.1 percent in the June stress test. Table 6 presents projections of the components of pre-tax net income, including provisions into the allowance and one-time income and expense and extraordinary items, under the severely adverse scenario for each of the 33 firms (see table 3 for aggregate). The projections are cumulative for the nine quarters of the projection horizon.
The Federal Reserve's projections of pre-tax net income under the severely adverse scenario imply negative net income at most of the 33 firms individually and for the firms as a group over the nine-quarter projection horizon. Projected pre-tax net income is an aggregate net loss of $173 billion over the projection horizon for the 33 firms. For the June stress test, projected pre-tax net income was a slightly larger loss of $177 billion even though CET1 declined less in June than in the December stress test. Further reducing CET1 are higher projected loan charge-offs combined with lower projected revenue over the projection horizon, which results in larger deferred tax assets. These assets are deducted from CET1 because they are not considered available to absorb losses.
The pre-tax net income projections incorporate loan losses through provisions, which equal projected loan losses plus the amount needed for the allowance to be at an appropriate level at the end of each quarter. The $429 billion in total provisions includes $514 billion in net charge-offs, with the remainder being the reserve release. These amounts are cumulative over the projection horizon and do not fully reveal variation in the allowance during the course of the nine quarters. Specifically, the projected allowance increases during the early quarters of the projection horizon, given the increased economic stress in the severely adverse scenario, and then declines as the economic stress abates.
While loan losses are higher for the December stress test than in the June stress test, the projected reserve release is due to the sharp increase in firms' loan-loss reserves since the beginning of the year. As firms simultaneously responded to the economic contraction and the adoption of CECL, loan-loss reserves more than doubled in the first two quarters of 2020.42 Without the increase in loan-loss reserves, projected provision expenses would increase by $100 billion.
The ratio of pre-tax net income to average assets for each of the 33 firms ranges from −3.3 percent to 3.3 percent (see figure 14). Projected cumulative pre–tax net income for most of the firms (29 of 33) is negative over the projection horizon. Differences across the firms reflect differences in the sensitivity of the various components of net income to the economic and financial market conditions in the supervisory scenarios. Additional variation in projected net income results from the effect of the global market shock and LCPD components that affect 13 of the 33 firms.
Firms that are required to include AOCI in regulatory capital and those that opt in to including it are also affected by OCI (see table 6). OCI is driven by unrealized gains and losses on AFS securities in the supervisory stress test. The severely adverse scenario features a lower initial level for the 10-year Treasury yield, leading to a relatively smaller decline in the yield in the first projection quarter and subsequently lower projected unrealized gains for AFS securities. The interest rate path and credit spreads assumed in the scenario result in $5.2 billion of OCI over the nine quarters of the projection horizon for firms required to include AOCI in regulatory capital and those that opt in to including it.
Table 2. Applicable capital ratios and calculations for firms in the December stress test
Capital ratio | Calculation, by aspect of ratio | |
---|---|---|
Capital in numerator | Denominator | |
Common equity tier 1 capital ratio | Definition of regulatory capital |
Standardized approach risk-weighted assets |
Tier 1 capital ratio | Definition of regulatory capital |
Standardized approach risk-weighted assets |
Total capital ratio | Definition of regulatory capital |
Standardized approach risk-weighted assets |
Tier 1 leverage ratio | Definition of regulatory capital |
Average assets |
Supplementary leverage ratio | Definition of regulatory capital |
Average assets and off-balance sheet exposures |
Table 3. 33 participating firms* Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Severely adverse scenario
Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3
Percent
Regulatory ratio | Actual 2020:Q2 | Stressed capital ratios 1 | |
---|---|---|---|
Ending | Minimum | ||
Common equity tier 1 capital ratio | 12.2 | 10.2 | 9.6 |
Tier 1 capital ratio | 13.8 | 11.8 | 11.3 |
Total capital ratio | 16.4 | 14.2 | 14.0 |
Tier 1 leverage ratio | 7.9 | 6.7 | 6.4 |
Supplementary leverage ratio | 7.4 | 5.5 | 5.2 |
1. The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Return to table
Projected loan losses, by type of loan, 2020:Q3–2022:Q3
Loan type | Billions of dollars | Portfolio loss rates (percent)1 |
---|---|---|
Loan losses | 514.3 | 7.7 |
First-lien mortgages, domestic | 25.8 | 2.1 |
Junior liens and HELOCs, domestic | 6.9 | 3.1 |
Commercial and industrial2 | 120.7 | 7.5 |
Commercial real estate, domestic | 98.3 | 12.6 |
Credit cards | 158.0 | 22.3 |
Other consumer3 | 47.6 | 6.4 |
Other loans 4 | 56.8 | 4.0 |
1. Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and Paycheck Protection Program (PPP) loans and are calculated over nine quarters. Return to table
2. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Return to table
3. Other consumer loans include student loans and automobile loans. Return to table
4. Other loans include international real estate loans. Return to table
Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3
Billions of dollars
Item | Actual 2020:Q2 |
Projected 2022:Q3 |
---|---|---|
Risk-weighted assets 1 | 10,370.5 | 10,275.0 |
1. For each quarter, risk-weighted assets are calculated under the Board's standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Return to table
Projected losses, revenue, and net income before taxes through 2022:Q3
Item | Billions of dollars | Percent of average assets 1 |
---|---|---|
Pre-provision net revenue | 370.8 | 2.0 |
equals | ||
Net interest income | 741.8 | 4.0 |
Noninterest income | 889.8 | 4.8 |
less | ||
Noninterest expense 2 | 1,260.8 | 6.8 |
Other revenue3 | 0.0 | |
less | ||
Provisions for loan and lease losses | 429.1 | |
Credit losses on investment securities (AFS/HTM)4 | 3.6 | |
Trading and counterparty losses 5 | 95.1 | |
Other losses/gains6 | 15.7 | |
equals | ||
Net income before taxes | -172.8 | -0.9 |
Memo items | ||
Other comprehensive income7 | 5.2 | |
Other effects on capital | Actual 2020:Q2 | 2022:Q3 |
AOCI included in capital (billions of dollars) | -37.2 | -32.0 |
1. Average assets is the nine-quarter average of total assets. Return to table
2. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Return to table
3. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. Return to table
4. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Return to table
5. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Return to table
6. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Return to table
7. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. Return to table
*Note: The Federal Reserve revised this report on June 24, 2021:
- 33 participating firms, Risk-weighted assets, Projected 2022:Q3 has been revised from 10,275.1 to 10,275.0.
- 33 participating firms, Pre-provision net revenue, Billions of dollars has been revised from 371.0 to 370.8.
- 33 participating firms, Net interest income, Billions of dollars has been revised from 741.9 to 741.8.
- 33 participating firms, Noninterest income, Billions of dollars has been revised from 889.6 to 889.8.
- 33 participating firms, Noninterest expense, Billions of dollars has been revised from 1,260.5 to 1,260.8.
- 33 participating firms, Net income before taxes, Billions of dollars has been revised from -172.6 to -172.8.
Table 4. Projected minimum common equity tier 1 capital ratio under the severely adverse scenario, 2020:Q3–2022:Q3 33 participating firms*
Percent
Firm | Stressed ratios with Dodd-Frank Act stress testing capital action assumptions |
---|---|
Ally Financial Inc. | 7.4 |
American Express Company | 13.5 |
Bank of America Corporation | 9.3 |
The Bank of New York Mellon Corporation | 11.9 |
Barclays US LLC | 14.7 |
BMO Financial Corp. | 7.0 |
BNP Paribas USA, Inc. | 11.2 |
Capital One Financial Corporation | 7.1 |
Citigroup Inc. | 9.6 |
Citizens Financial Group, Inc. | 6.3 |
Credit Suisse Holdings (USA), Inc. | 16.9 |
DB USA Corporation | 19.8 |
Discover Financial Services | 8.3 |
Fifth Third Bancorp | 7.5 |
The Goldman Sachs Group, Inc. | 8.5 |
HSBC North America Holdings Inc. | 5.5 |
Huntington Bancshares Incorporated | 8.0 |
JPMorgan Chase & Co. | 10.0 |
KeyCorp | 7.7 |
M&T Bank Corporation | 5.0 |
Morgan Stanley | 12.4 |
MUFG Americas Holdings Corporation | 10.9 |
Northern Trust Corporation | 12.6 |
The PNC Financial Services Group, Inc. | 9.6 |
RBC US Group Holdings LLC | 12.6 |
Regions Financial Corporation | 7.1 |
Santander Holdings USA, Inc. | 14.4 |
State Street Corporation | 11.4 |
TD Group US Holdings LLC | 15.4 |
Truist Financial Corporation | 7.8 |
UBS Americas Holding LLC | 16.7 |
U.S. Bancorp | 7.6 |
Wells Fargo & Company | 8.3 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratio presented is for the period 2020:Q3 to 2022:Q3.
Source: Federal Reserve estimates in the severely adverse scenario.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc., Stressed ratios with DFA stress testing capital action assumptions has been revised from 11.5 to 11.2.
Table 5.A. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the severely adverse scenario:Risk-based Category I, II, and III firms
Percent
Firm | Common equity tier 1 capital ratio |
Tier 1 capital ratio | Total capital ratio | Tier 1 leverage ratio | Supplementary leverage ratio1 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
|
Bank of America Corporation | 11.6 | 9.5 | 9.3 | 13.2 | 11.1 | 10.9 | 15.8 | 13.5 | 13.5 | 7.4 | 6.2 | 6.1 | 7.1 | 5.3 | 5.2 |
The Bank of New York Mellon Corporation | 12.7 | 14.6 | 11.9 | 15.6 | 17.4 | 14.8 | 16.6 | 18.4 | 15.9 | 6.2 | 7.0 | 5.9 | 8.2 | 8.3 | 7.1 |
Barclays US LLC | 17.3 | 15.5 | 14.7 | 20.4 | 18.7 | 18.0 | 23.4 | 21.9 | 21.3 | 9.5 | 8.7 | 8.2 | 9.1 | 7.6 | 7.2 |
Capital One Financial Corporation | 12.4 | 7.2 | 7.1 | 14.2 | 8.9 | 8.9 | 16.7 | 11.5 | 11.4 | 10.3 | 6.6 | 6.6 | 9.7 | 5.5 | 5.5 |
Citigroup Inc. | 11.8 | 10.9 | 9.6 | 13.3 | 12.5 | 11.1 | 16.5 | 15.5 | 14.5 | 7.1 | 6.6 | 5.8 | 6.7 | 5.3 | 4.7 |
Credit Suisse Holdings (USA), Inc. | 21.4 | 17.8 | 16.9 | 22.0 | 18.5 | 17.6 | 22.1 | 18.5 | 17.8 | 14.0 | 11.2 | 10.6 | 12.6 | 10.1 | 9.5 |
DB USA Corporation | 31.5 | 19.8 | 19.8 | 44.7 | 34.3 | 34.3 | 44.8 | 34.6 | 34.6 | 10.4 | 7.3 | 7.3 | 12.0 | 6.6 | 6.6 |
The Goldman Sachs Group, Inc. | 13.3 | 9.8 | 8.5 | 15.2 | 11.8 | 10.5 | 18.1 | 14.6 | 13.6 | 7.6 | 5.8 | 5.1 | 6.6 | 4.4 | 3.8 |
HSBC North America Holdings Inc. | 13.6 | 5.5 | 5.5 | 15.4 | 7.3 | 7.3 | 19.9 | 11.8 | 11.8 | 6.9 | 3.2 | 3.2 | 6.4 | 2.5 | 2.5 |
JPMorgan Chase & Co. | 12.4 | 10.8 | 10.0 | 14.3 | 12.7 | 11.9 | 16.7 | 14.8 | 14.4 | 6.9 | 6.1 | 5.7 | 6.8 | 5.0 | 4.7 |
Morgan Stanley | 16.5 | 13.1 | 12.4 | 18.6 | 15.2 | 14.5 | 21.0 | 17.7 | 17.1 | 8.1 | 6.5 | 6.2 | 7.3 | 5.1 | 4.9 |
Northern Trust Corporation | 13.4 | 13.2 | 12.6 | 14.6 | 14.3 | 13.8 | 16.5 | 16.5 | 16.3 | 7.6 | 7.5 | 7.2 | 9.0 | 8.6 | 8.3 |
The PNC Financial Services Group, Inc. | 11.3 | 9.8 | 9.6 | 12.4 | 11.0 | 10.8 | 14.9 | 13.0 | 13.0 | 9.4 | 8.3 | 8.1 | 9.3 | 7.1 | 6.9 |
State Street Corporation | 12.3 | 13.3 | 11.4 | 14.6 | 15.6 | 13.7 | 15.7 | 16.8 | 14.9 | 6.1 | 6.5 | 5.7 | 8.3 | 8.2 | 7.2 |
TD Group US Holdings LLC | 16.3 | 16.0 | 15.4 | 16.3 | 16.0 | 15.4 | 17.5 | 16.8 | 16.7 | 8.5 | 8.4 | 8.1 | 9.4 | 7.5 | 7.2 |
Truist Financial Corporation | 9.7 | 7.9 | 7.8 | 11.6 | 9.8 | 9.7 | 14.0 | 12.5 | 12.5 | 9.0 | 7.7 | 7.6 | 8.5 | 6.7 | 6.6 |
UBS Americas Holding LLC | 21.0 | 17.8 | 16.7 | 25.8 | 23.1 | 22.1 | 27.0 | 24.8 | 23.6 | 11.3 | 9.2 | 8.7 | 11.2 | 7.8 | 7.4 |
U.S. Bancorp | 9.0 | 8.0 | 7.6 | 10.6 | 9.6 | 9.2 | 12.8 | 11.5 | 11.4 | 8.0 | 7.2 | 6.9 | 7.1 | 5.8 | 5.6 |
Wells Fargo & Company | 11.0 | 8.7 | 8.3 | 12.6 | 10.4 | 9.9 | 15.9 | 13.4 | 13.3 | 8.0 | 6.5 | 6.2 | 7.5 | 5.3 | 5.1 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3.
1. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Return to table
Source: Federal Reserve estimates in the severely adverse scenario.
Table 5.B. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the severely adverse scenario: Risk-based Category IV firms*
Percent
Firm | Common equity tier 1 capital ratio |
Tier 1 capital ratio | Total capital ratio | Tier 1 leverage ratio | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual 2020:Q2 | Ending | Minimum | Actual 2020:Q2 | Ending | Minimum | Actual 2020:Q2 | Ending | Minimum | Actual 2020:Q2 | Ending | Minimum | |
Ally Financial Inc. | 10.1 | 7.4 | 7.4 | 11.9 | 9.1 | 9.1 | 13.8 | 11.1 | 11.1 | 8.9 | 6.9 | 6.9 |
American Express Company | 13.6 | 17.0 | 13.5 | 14.8 | 18.2 | 14.8 | 16.5 | 19.8 | 16.5 | 10.4 | 13.1 | 10.4 |
BMO Financial Corp. | 12.1 | 7.0 | 7.0 | 12.6 | 7.5 | 7.5 | 15.1 | 10.0 | 10.0 | 8.5 | 5.0 | 5.0 |
BNP Paribas USA, Inc. | 15.8 | 11.2 | 11.2 | 15.8 | 11.2 | 11.2 | 18.2 | 13.5 | 13.5 | 8.6 | 6.1 | 6.1 |
Citizens Financial Group, Inc. | 9.6 | 6.3 | 6.3 | 10.9 | 7.7 | 7.7 | 13.1 | 9.9 | 9.9 | 9.3 | 6.5 | 6.5 |
Discover Financial Services | 11.7 | 9.0 | 8.3 | 12.9 | 10.2 | 9.4 | 14.7 | 12.0 | 11.4 | 10.0 | 8.1 | 7.3 |
Fifth Third Bancorp | 9.7 | 7.6 | 7.5 | 11.0 | 8.9 | 8.8 | 14.2 | 12.1 | 12.1 | 8.2 | 6.6 | 6.5 |
Huntington Bancshares Incorporated | 9.8 | 8.2 | 8.0 | 11.8 | 10.1 | 10.0 | 13.8 | 11.9 | 11.9 | 8.9 | 7.6 | 7.5 |
KeyCorp | 9.1 | 8.0 | 7.7 | 10.5 | 9.4 | 9.1 | 12.8 | 11.3 | 11.3 | 8.8 | 7.9 | 7.7 |
M&T Bank Corporation | 9.5 | 5.0 | 5.0 | 10.7 | 6.2 | 6.2 | 13.0 | 8.5 | 8.5 | 8.6 | 4.9 | 4.9 |
MUFG Americas Holdings Corporation | 14.5 | 10.9 | 10.9 | 14.5 | 10.9 | 10.9 | 15.6 | 12.0 | 12.0 | 8.9 | 6.7 | 6.7 |
RBC US Group Holdings LLC | 16.1 | 12.7 | 12.6 | 16.1 | 12.7 | 12.6 | 16.8 | 13.8 | 13.8 | 9.9 | 7.7 | 7.6 |
Regions Financial Corporation | 8.9 | 7.2 | 7.1 | 10.4 | 8.7 | 8.6 | 12.6 | 10.8 | 10.8 | 8.4 | 7.1 | 7.0 |
Santander Holdings USA, Inc. | 14.3 | 15.5 | 14.4 | 15.7 | 16.9 | 15.8 | 17.1 | 18.3 | 17.3 | 12.4 | 13.5 | 12.3 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3.
Source: Federal Reserve estimates in the severely adverse scenario.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc., CET 1 capital ratio (%), Ending has been revised from 11.5 to 11.2.
- BNP Paribas USA, Inc., CET 1 capital ratio (%), Minimum has been revised from 11.5 to 11.2.
- BNP Paribas USA, Inc., Tier 1 capital ratio (%), Ending has been revised from 11.5 to 11.2.
- BNP Paribas USA, Inc., Tier 1 capital ratio (%), Minimum has been revised from 11.5 to 11.2.
- BNP Paribas USA, Inc., Total capital ratio (%), Ending has been revised from 13.8 to 13.5.
- BNP Paribas USA, Inc., Total capital ratio (%), Minimum has been revised from 13.8 to 13.5.
- BNP Paribas USA, Inc., Tier 1 leverage ratio (%), Ending has been revised from 6.2 to 6.1.
- BNP Paribas USA, Inc., Tier 1 leverage ratio (%), Minimum has been revised from 6.2 to 6.1.
Table 5.C. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the severely adverse scenario: 33 participating firms
Percent
Firm | Common equity tier 1 capital ratio |
Tier 1 capital ratio | Total capital ratio | Tier 1 leverage ratio | Supplementary leverage ratio1 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
|
33 participating firms | 12.2 | 10.2 | 9.6 | 13.8 | 11.8 | 11.3 | 16.4 | 14.2 | 14.0 | 7.9 | 6.7 | 6.4 | 7.4 | 5.5 | 5.2 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3.
1. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Return to table
Source: Federal Reserve estimates in the severely adverse scenario.
Figure 11. Change from 2020:Q2 to minimum CET1 ratio in the severely adverse scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of risk-weighted assets.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc. changed from 4.3 to 4.6.
Figure 12. Total loan loss rates in the severely adverse scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average loan balances.
Table 6. Projected losses, revenue, and net income before taxes through 2022:Q3 under the severely adverse scenario: 33 participating firms*
Billions of dollars
Firm | Sum of revenues | Minus sum of provisions and losses | Equals | Memo items | Other effects on capital | ||||
---|---|---|---|---|---|---|---|---|---|
Pre-provision net revenue1 | Other revenue 2 |
Provisions for loan and lease losses | Credit losses on investment securities (AFS/HTM) 3 | Trading and counterparty losses 4 | Other losses/ gains5 |
Net income before taxes |
Other compre- hensive income6 |
AOCI included in capital (2022:Q3) |
|
Ally Financial Inc. | 3.7 | 0.0 | 7.0 | 0.3 | 0.0 | 0.0 | -3.6 | 0.0 | 0.0 |
American Express Company | 18.8 | 0.0 | 12.6 | 0.0 | 0.0 | 0.0 | 6.2 | 0.0 | -2.9 |
Bank of America Corporation | 34.4 | 0.0 | 51.8 | 0.1 | 11.3 | 1.6 | -30.5 | 1.8 | 0.3 |
The Bank of New York Mellon Corporation | 7.6 | 0.0 | 1.6 | 0.2 | 1.4 | 0.0 | 4.4 | -0.1 | -2.0 |
Barclays US LLC | 4.7 | 0.0 | 4.3 | 0.0 | 1.0 | 0.0 | -0.6 | 0.0 | 0.0 |
BMO Financial Corp. | 0.8 | 0.0 | 6.6 | 0.0 | 0.0 | 0.0 | -5.8 | 0.0 | 0.0 |
BNP Paribas USA, Inc. | 0.8 | 0.0 | 5.0 | 0.0 | 0.0 | 0.0 | -4.2 | 0.0 | 0.0 |
Capital One Financial Corporation | 23.1 | 0.0 | 35.8 | 0.0 | 0.0 | 0.1 | -12.8 | 0.0 | -0.1 |
Citigroup Inc. | 49.4 | 0.0 | 40.0 | 0.5 | 10.3 | 1.2 | -2.7 | 1.1 | -34.4 |
Citizens Financial Group, Inc. | 3.7 | 0.0 | 8.2 | 0.0 | 0.0 | 0.0 | -4.6 | 0.0 | 0.0 |
Credit Suisse Holdings (USA), Inc. | 1.1 | 0.0 | 0.2 | 0.0 | 2.6 | 0.2 | -1.8 | 0.0 | 0.0 |
DB USA Corporation | -0.7 | 0.0 | 0.9 | 0.0 | 0.9 | 0.0 | -2.5 | 0.0 | -0.2 |
Discover Financial Services | 13.6 | 0.0 | 15.1 | 0.0 | 0.0 | 0.0 | -1.5 | 0.0 | 0.0 |
Fifth Third Bancorp | 5.7 | 0.0 | 8.2 | 0.0 | 0.0 | 0.0 | -2.6 | 0.0 | 0.0 |
The Goldman Sachs Group, Inc. | 17.4 | 0.0 | 11.8 | 0.0 | 20.6 | 3.8 | -18.8 | 0.0 | -0.4 |
HSBC North America Holdings Inc. | -0.4 | 0.0 | 7.2 | 0.1 | 1.2 | 0.0 | -8.8 | 0.0 | 0.1 |
Huntington Bancshares Incorporated | 3.1 | 0.0 | 4.1 | 0.0 | 0.0 | 0.0 | -1.1 | 0.0 | 0.0 |
JPMorgan Chase & Co. | 59.9 | 0.0 | 52.1 | 0.8 | 23.2 | 2.5 | -18.8 | -0.2 | 5.9 |
KeyCorp | 4.0 | 0.0 | 5.0 | 0.0 | 0.0 | 0.1 | -1.0 | 0.0 | 0.0 |
M&T Bank Corporation | 4.3 | 0.0 | 8.9 | 0.0 | 0.0 | 0.0 | -4.6 | 0.0 | 0.0 |
Morgan Stanley | 6.1 | 0.0 | 7.6 | 0.1 | 10.1 | 3.3 | -14.9 | 0.7 | 0.7 |
MUFG Americas Holdings Corporation | 1.4 | 0.0 | 5.1 | 0.1 | 0.0 | 0.1 | -3.8 | 0.0 | 0.0 |
Northern Trust Corporation | 2.0 | 0.0 | 2.2 | 0.1 | 0.0 | 0.0 | -0.3 | 0.2 | 0.6 |
The PNC Financial Services Group, Inc. | 9.3 | 0.0 | 12.6 | 0.1 | 0.0 | 0.4 | -3.8 | 0.0 | 0.0 |
RBC US Group Holdings LLC | 1.9 | 0.0 | 4.2 | 0.2 | 0.0 | 0.0 | -2.6 | 0.0 | 0.0 |
Regions Financial Corporation | 3.6 | 0.0 | 5.0 | 0.0 | 0.0 | 0.0 | -1.4 | 0.0 | 0.0 |
Santander Holdings USA, Inc. | 7.2 | 0.0 | 4.5 | 0.0 | 0.0 | 0.4 | 2.3 | 0.0 | 0.0 |
State Street Corporation | 3.9 | 0.0 | 1.5 | 0.1 | 1.0 | 0.0 | 1.3 | 0.0 | -0.6 |
TD Group US Holdings LLC | 9.7 | 0.0 | 9.7 | 0.2 | 0.0 | 0.0 | -0.2 | 0.0 | 0.0 |
Truist Financial Corporation | 12.2 | 0.0 | 17.3 | 0.1 | 0.0 | 0.2 | -5.5 | 0.0 | 0.0 |
UBS Americas Holding LLC | 2.5 | 0.0 | 1.3 | 0.0 | 1.2 | 0.1 | -0.1 | 0.0 | 0.0 |
U.S. Bancorp | 16.7 | 0.0 | 19.8 | 0.0 | 0.0 | 0.0 | -3.1 | 0.0 | -0.1 |
Wells Fargo & Company | 39.4 | 0.0 | 52.0 | 0.6 | 10.4 | 1.6 | -25.2 | 1.7 | 1.2 |
33 participating firms | 370.8 | 0.0 | 429.1 | 3.6 | 95.1 | 15.7 | -172.8 | 5.2 | -32.0 |
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding.
1. Pre-provision net revenue includes losses from operational-risk events and other real estate owned costs. Return to table
2. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. Return to table
3. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Return to table
4. Trading and counterparty losses include mark-to-market and credit valuation adjustments losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Return to table
5. Other losses/gains includes projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Return to table
6. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. Return to table
Source: Federal Reserve estimates in the severely adverse scenario.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc., Pre-provision net revenue, Billions of dollars has been revised from 1.1 to 0.8.
- BNP Paribas USA, Inc., Net income before taxes, Billions of dollars has been revised from -3.9 to -4.2.
- 33 participating firms, Pre-provision net revenue, Billions of dollars has been revised from 371.0 to 370.8.
- 33 participating firms, Net income before taxes, Billions of dollars has been revised from -172.6 to -172.8.
Table 7. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the severely adverse scenario: 33 participating firms
Billions of dollars
Firm | Loan losses |
First-lien mortgages, domestic |
Junior liens and HELOCs, domestic |
Commercial and industrial1 |
Commercial real estate, domestic |
Credit cards |
Other consumer2 |
Other loans3 |
---|---|---|---|---|---|---|---|---|
Ally Financial Inc. | 8.1 | 0.2 | 0.0 | 2.4 | 0.3 | 0.0 | 5.0 | 0.2 |
American Express Company | 15.4 | 0.0 | 0.0 | 5.3 | 0.0 | 9.7 | 0.3 | 0.0 |
Bank of America Corporation | 60.2 | 4.7 | 0.9 | 16.7 | 12.5 | 17.6 | 1.6 | 6.2 |
The Bank of New York Mellon Corporation | 1.6 | 0.1 | 0.0 | 0.1 | 0.4 | 0.0 | 0.4 | 0.6 |
Barclays US LLC | 5.0 | 0.0 | 0.0 | 0.0 | 0.0 | 4.8 | 0.1 | 0.1 |
BMO Financial Corp. | 6.5 | 0.2 | 0.1 | 3.0 | 1.7 | 0.1 | 0.3 | 1.2 |
BNP Paribas USA, Inc. | 5.0 | 0.2 | 0.1 | 1.5 | 1.7 | 0.1 | 1.1 | 0.4 |
Capital One Financial Corporation | 42.6 | 0.0 | 0.0 | 4.7 | 2.1 | 27.5 | 7.2 | 1.1 |
Citigroup Inc. | 55.9 | 1.9 | 0.8 | 10.3 | 2.8 | 30.6 | 2.4 | 7.2 |
Citizens Financial Group, Inc. | 8.6 | 0.5 | 0.5 | 2.4 | 2.7 | 0.4 | 1.7 | 0.4 |
Credit Suisse Holdings (USA), Inc. | 0.2 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.1 |
DB USA Corporation | 0.9 | 0.1 | 0.0 | 0.0 | 0.7 | 0.0 | 0.0 | 0.1 |
Discover Financial Services | 18.9 | 0.0 | 0.1 | 0.0 | 0.0 | 17.1 | 1.6 | 0.0 |
Fifth Third Bancorp | 9.3 | 0.4 | 0.2 | 3.5 | 3.3 | 0.6 | 0.8 | 0.4 |
The Goldman Sachs Group, Inc. | 13.5 | 0.0 | 0.0 | 4.7 | 3.3 | 0.6 | 0.9 | 4.1 |
HSBC North America Holdings Inc. | 7.4 | 0.5 | 0.1 | 2.0 | 3.7 | 0.4 | 0.0 | 0.6 |
Huntington Bancshares Incorporated | 5.0 | 0.5 | 0.2 | 1.5 | 1.6 | 0.1 | 0.8 | 0.2 |
JPMorgan Chase & Co. | 70.1 | 4.3 | 0.6 | 18.6 | 5.0 | 28.3 | 2.3 | 11.0 |
KeyCorp | 5.8 | 0.3 | 0.3 | 2.2 | 1.8 | 0.2 | 0.5 | 0.5 |
M&T Bank Corporation | 9.2 | 0.5 | 0.2 | 1.3 | 6.0 | 0.1 | 0.8 | 0.3 |
Morgan Stanley | 7.2 | 0.5 | 0.0 | 1.2 | 2.3 | 0.0 | 0.2 | 3.0 |
MUFG Americas Holdings Corporation | 5.4 | 0.9 | 0.1 | 1.7 | 1.5 | 0.1 | 0.6 | 0.5 |
Northern Trust Corporation | 2.0 | 0.1 | 0.0 | 0.3 | 0.4 | 0.0 | 0.0 | 1.2 |
The PNC Financial Services Group, Inc. | 15.8 | 0.5 | 0.3 | 6.7 | 4.8 | 1.5 | 1.0 | 1.2 |
RBC US Group Holdings LLC | 3.9 | 0.5 | 0.0 | 0.9 | 1.6 | 0.0 | 0.2 | 0.7 |
Regions Financial Corporation | 6.0 | 0.5 | 0.2 | 2.0 | 1.8 | 0.2 | 0.7 | 0.5 |
Santander Holdings USA, Inc. | 9.0 | 0.2 | 0.2 | 0.8 | 1.1 | 0.1 | 6.4 | 0.2 |
State Street Corporation | 1.3 | 0.0 | 0.0 | 0.3 | 0.1 | 0.0 | 0.0 | 0.9 |
TD Group US Holdings LLC | 11.2 | 0.6 | 0.3 | 2.3 | 2.4 | 3.8 | 0.9 | 0.9 |
Truist Financial Corporation | 19.2 | 1.0 | 0.4 | 4.4 | 7.0 | 0.7 | 3.9 | 1.7 |
UBS Americas Holding LLC | 1.1 | 0.4 | 0.0 | 0.1 | 0.0 | 0.0 | 0.2 | 0.3 |
U.S. Bancorp | 23.1 | 1.3 | 0.6 | 6.7 | 6.6 | 5.0 | 1.7 | 1.3 |
Wells Fargo & Company | 59.9 | 4.9 | 0.7 | 13.1 | 19.1 | 8.2 | 3.9 | 10.0 |
33 participating firms | 514.3 | 25.8 | 6.9 | 120.7 | 98.3 | 158.0 | 47.6 | 56.8 |
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding.
1. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Return to table
2. Other consumer loans include student loans and automobile loans. Return to table
3. Other loans include international real estate loans. Return to table
Source: Federal Reserve estimates in the severely adverse scenario.
Table 8. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the severely adverse scenario: 33 participating firms
Percent of average loan balances
Firm | Loan losses 1 |
First-lien mortgages, domestic |
Junior liens and HELOCs, domestic |
Commercial and industrial 2 |
Commercial real estate, domestic |
Credit cards | Other consumer 3 |
Other loans4 |
---|---|---|---|---|---|---|---|---|
Ally Financial Inc. | 6.9 | 1.4 | 3.8 | 8.2 | 5.7 | 0.0 | 7.7 | 14.1 |
American Express Company | 13.8 | 0.0 | 0.0 | 14.7 | 0.0 | 13.3 | 16.7 | 5.6 |
Bank of America Corporation | 6.1 | 2.0 | 2.4 | 5.8 | 16.4 | 20.9 | 2.1 | 3.3 |
The Bank of New York Mellon Corporation | 3.0 | 1.3 | 7.5 | 2.9 | 9.2 | 0.0 | 12.1 | 1.7 |
Barclays US LLC | 13.8 | 0.0 | 0.0 | 22.8 | 12.6 | 22.4 | 16.7 | 0.7 |
BMO Financial Corp. | 7.6 | 1.9 | 3.7 | 8.0 | 15.1 | 21.2 | 4.8 | 6.0 |
BNP Paribas USA, Inc. | 7.6 | 2.3 | 3.4 | 10.3 | 11.1 | 23.7 | 7.6 | 3.5 |
Capital One Financial Corporation | 17.0 | 2.5 | 6.9 | 13.0 | 6.6 | 27.7 | 11.4 | 5.4 |
Citigroup Inc. | 8.2 | 2.3 | 7.4 | 5.7 | 11.7 | 21.4 | 8.2 | 3.3 |
Citizens Financial Group, Inc. | 7.0 | 2.3 | 4.2 | 6.3 | 15.5 | 25.1 | 6.4 | 6.2 |
Credit Suisse Holdings (USA), Inc. | 1.7 | 0.0 | 0.0 | 0.0 | 52.2 | 0.0 | 16.7 | 0.6 |
DB USA Corporation | 7.0 | 2.5 | 6.0 | 1.2 | 16.5 | 0.0 | 8.0 | 2.5 |
Discover Financial Services | 21.3 | 2.5 | 9.9 | 27.0 | 22.3 | 24.4 | 9.6 | 5.5 |
Fifth Third Bancorp | 8.4 | 2.7 | 3.8 | 7.7 | 20.9 | 29.3 | 5.1 | 4.3 |
The Goldman Sachs Group, Inc. | 10.1 | 2.5 | 4.0 | 12.6 | 44.8 | 23.7 | 11.1 | 5.3 |
HSBC North America Holdings Inc. | 10.6 | 3.0 | 8.1 | 6.7 | 33.1 | 35.8 | 11.2 | 7.3 |
Huntington Bancshares Incorporated | 6.8 | 3.8 | 3.1 | 7.2 | 16.4 | 23.7 | 4.8 | 3.8 |
JPMorgan Chase & Co. | 7.3 | 2.1 | 2.2 | 10.3 | 4.2 | 22.3 | 3.8 | 4.7 |
KeyCorp | 5.9 | 2.9 | 3.9 | 5.9 | 11.6 | 23.7 | 5.0 | 2.9 |
M&T Bank Corporation | 10.1 | 3.4 | 3.6 | 7.3 | 16.3 | 23.7 | 7.4 | 5.0 |
Morgan Stanley | 4.4 | 1.7 | 4.0 | 8.4 | 18.3 | 0.0 | 0.9 | 3.6 |
MUFG Americas Holdings Corporation | 6.4 | 2.9 | 3.6 | 10.2 | 8.1 | 23.7 | 17.0 | 4.4 |
Northern Trust Corporation | 5.9 | 1.2 | 7.9 | 6.3 | 8.7 | 0.0 | 16.7 | 6.4 |
The PNC Financial Services Group, Inc. | 6.5 | 1.5 | 1.9 | 7.1 | 13.3 | 26.2 | 4.0 | 3.1 |
RBC US Group Holdings LLC | 6.8 | 3.1 | 3.5 | 11.0 | 11.3 | 23.7 | 13.8 | 3.7 |
Regions Financial Corporation | 6.9 | 2.7 | 4.3 | 7.8 | 12.9 | 19.3 | 12.9 | 3.0 |
Santander Holdings USA, Inc. | 10.0 | 2.9 | 3.8 | 5.1 | 7.2 | 23.7 | 16.8 | 2.5 |
State Street Corporation | 4.9 | 0.0 | 0.0 | 6.6 | 6.1 | 0.0 | 0.6 | 4.5 |
TD Group US Holdings LLC | 6.6 | 2.1 | 4.0 | 6.5 | 8.2 | 30.1 | 3.4 | 3.1 |
Truist Financial Corporation | 6.3 | 2.0 | 2.7 | 6.1 | 11.8 | 19.0 | 7.1 | 3.7 |
UBS Americas Holding LLC | 2.0 | 2.0 | 0.0 | 2.4 | 2.0 | 23.7 | 0.9 | 6.9 |
U.S. Bancorp | 7.6 | 1.9 | 4.0 | 7.5 | 17.3 | 23.7 | 3.9 | 4.6 |
Wells Fargo & Company | 6.5 | 1.8 | 2.0 | 7.2 | 14.9 | 22.8 | 5.4 | 5.0 |
33 participating firms | 7.7 | 2.1 | 3.1 | 7.5 | 12.6 | 22.3 | 6.4 | 4.0 |
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding.
1. Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Return to table
2. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Return to table
3. Other consumer loans include student loans and automobile loans. Return to table
4. Other loans include international real estate loans. Return to table
Source: Federal Reserve estimates in the severely adverse scenario.
Figure 13. PPNR rates in the severely adverse scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc. changed from 0.8 to 0.6.
Figure 14. Pre-tax net income rates in the severely adverse scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc. changed from -2.8 to -2.9.
- Median changed from -1.2 to -1.1.
Alternative Severe Scenario
The projected maximum declines in post-stress capital ratios in the alternative severe scenario are approximately similar to those under the severely adverse scenario. In the aggregate, each of the five capital and leverage ratios declines to a similar minimum as the severely adverse scenario, but the ratios rise less over the remaining projection horizon, reaching a lower ending value than the severely adverse scenario. The levels at the end of the projection horizon in the third quarter of 2022 range from 1.4 percentage points to 2.3 percentage points lower than at the start of the projection horizon (see table 9) for the five capital and leverage ratios. The changes in post-stress capital ratios vary considerably across the 33 firms (see figure 16 and table 10).
Generally, the slightly lower ending capital and leverage ratios reflect the sluggish recovery and relatively higher persistence of stress in the alternative severe scenario compared to the severely adverse. The alternative severe scenario features a less-severe initial drop in global economic activity relative to the severely adverse scenario but a more sluggish and severe subsequent recovery. Unemployment, volatility, and corporate spreads stay elevated for a longer period of time, while the term spread recovers slightly faster.
PPNR is slightly lower compared to the severely adverse scenario due to lower trading revenue from the slower recovery in equity asset values. This lower revenue is only partially offset by higher interest income as a result of wider net interest margins compared to the severely adverse scenario. While larger balance sheets result in higher revenue projections, the increased revenue is roughly offset by higher expenses in the stress test projections.
Losses over the full 13-quarter projection horizon are higher in the alternative severe scenario, leading to higher projected loan loss provisions.43 Loss rates in the first nine quarters are lower in the alternative severe scenario, as the sluggish recovery pushes losses further out into the projection horizon than in the severely adverse scenario. Other losses and gains are slightly higher in the alternative severe scenario, reflecting the larger markdowns for loans held under the FVO as spreads stay elevated for a longer period of time. The alternative severe projections imply lower aggregate pre-tax net income, which slightly reduces post-stress ending capital ratios.
Projected Losses
The Federal Reserve projects that the 33 firms as a group would experience significant losses on loans and other positions under the alternative severe scenario. In this scenario, losses are projected to be $612 billion for the 33 firms in the aggregate over the nine quarters of the projection horizon.
These losses include
- $491 billion in accrual loan portfolio losses;
- $4 billion in securities losses;44
- $95 billion in trading and counterparty losses at the 13 firms with substantial trading, processing, or custodial operations; and
- $22 billion in additional losses from items such as loans booked under the FVO (see table 9).
Losses on accrual loan portfolios account for 80 percent of the projected losses for the 33 firms, while trading and counterparty losses account for 16 percent (see figure 15).
Figure 15. Projected losses in the alternative severe scenario
Loan Losses
Total loan losses are $491 billion for the 33 firms (see table 9). For the June stress test, total loan losses were $433 billion for the same firms. Consumer and commercial products represent 36 and 44 percent of total projected losses, respectively. C&I loan losses and credit card losses are the two largest categories of loan losses at $121 billion and $144 billion, respectively.
For the full group of 33 firms, the nine-quarter cumulative loss rate for all accrual loan portfolios is 7.3 percent, where the loss rate is calculated as total projected loan losses over the nine quarters of the projection horizon divided by average loan balances over the horizon. However, total loan loss rates vary significantly across firms, ranging between 1.6 percent and 19.5 percent across these institutions (see table 14 and figure 17).
Losses on Trading, Private Equity, SFT, and Derivatives Positions
The global market shock and LCPD components in the alternative severe scenario are the same as those reported in the severely adverse scenario.
Projected PPNR
In the aggregate, the 33 firms are projected to generate $363 billion in PPNR cumulatively over the nine quarters of the projection horizon, equal to 1.9 percent of their combined average assets* (see table 9). The Federal Reserve's PPNR projections are driven by the shape of the yield curve, the path of asset prices, equity market volatility, and measures of economic activity in the alternative severe scenario. In addition, the PPNR projections incorporate expenses stemming from estimates of elevated levels of losses from operational-risk events such as fraud, employee lawsuits, litigation-related expenses, or computer system or other operating disruptions.45 In aggregate for the 33 firms, operational-risk losses are $162 billion for the December stress test. For the June stress test, operational-risk losses were $144 billion.
Net Income and Regulatory Capital Treatment
Projected PPNR and losses are the primary determinants of projected pre-tax net income. The projected decline in pre-tax net income is 1.1 percent of average total assets, which is the same as the decline of 1.1 percent in the June stress test. Table 12 presents projections of the components of pre-tax net income, including provisions into the allowance and one-time income and expense and extraordinary items, under the alternative severe scenario for each of the 33 firms (see table 9 for aggregate). The projections are cumulative for the nine quarters of the projection horizon.
The Federal Reserve's projections of pre-tax net income under the alternative severe scenario imply negative net income at most of the 33 firms individually and for the firms as a group over the nine-quarter projection horizon. Projected pre-tax net income is an aggregate net loss of $198 billion over the projection horizon for the 33 firms. The projected pre–tax net income incorporates $440 billion in total provisions.
The ratio of pre-tax net income to average assets for each of the 33 firms ranges from −3.5 percent to 3.5 percent (see figure 19). Projected cumulative pre–tax net income for most of the firms is negative over the projection horizon.
Firms that are required to include AOCI in regulatory capital and those that opt in to including it are also affected by OCI (see table 12). OCI is driven by unrealized gains and losses on AFS securities in the supervisory stress test. The interest rate path and credit spreads assumed in the alternative severe scenario result in a loss of $3.1 billion of OCI over the nine quarters of the projection horizon for firms required to include AOCI in regulatory capital and those that opt in to including it.
Table 9. 33 participating firms* Projected stressed capital ratios, risk-weighted assets, losses, revenues, net income before taxes, and loan losses Federal Reserve estimates: Alternative severe scenario
Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3
Percent
Regulatory ratio | Actual 2020:Q2 | Stressed capital ratios 1 | |
---|---|---|---|
Ending | Minimum | ||
Common equity tier 1 capital ratio | 12.2 | 9.9 | 9.7 |
Tier 1 capital ratio | 13.8 | 11.5 | 11.4 |
Total capital ratio | 16.4 | 14.1 | 14.1 |
Tier 1 leverage ratio | 7.9 | 6.5 | 6.4 |
Supplementary leverage ratio | 7.4 | 5.3 | 5.2 |
1. The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Return to table
Projected loan losses, by type of loan, 2020:Q3–2022:Q3
Loan type | Billions of dollars | Portfolio loss rates (percent)1 |
---|---|---|
Loan losses | 491.2 | 7.3 |
First-lien mortgages, domestic | 24.4 | 2.0 |
Junior liens and HELOCs, domestic | 6.6 | 3.0 |
Commercial and industrial2 | 121.4 | 7.6 |
Commercial real estate, domestic | 92.4 | 11.9 |
Credit cards | 144.1 | 20.3 |
Other consumer3 | 44.6 | 6.0 |
Other loans4 | 57.7 | 4.1 |
1. Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Return to table
2. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Return to table
3. Other consumer loans include student loans and automobile loans. Return to table
4. Other loans include international real estate loans. Return to table
Risk-weighted assets, actual 2020:Q2 and projected 2022:Q3
Billions of dollars
Item | Actual 2020:Q2 |
Projected 2022:Q3 |
---|---|---|
Risk-weighted assets1 | 10,370.5 | 10,271.8 |
1. For each quarter, risk-weighted assets are calculated under the Board's standardized capital risk-based approach in 12 C.F.R. pt. 217, subpt. D. Return to table
Projected losses, revenue, and net income before taxes through 2022:Q3
Item | Billions of dollars | Percent of average assets1 |
---|---|---|
Pre-provision net revenue | 362.9 | 1.9 |
equals | ||
Net interest income | 747.4 | 4.0 |
Noninterest income | 879.0 | 4.7 |
less | ||
Noninterest expense 2 | 1,263.5 | 6.8 |
Other revenue3 | 0.0 | |
less | ||
Provisions for loan and lease losses | 440.1 | |
Credit losses on investment securities (AFS/HTM) 4 | 3.7 | |
Trading and counterparty losses5 | 95.1 | |
Other losses/gains 6 | 22.4 | |
equals | ||
Net income before taxes | -198.4 | -1.1 |
Memo items | ||
Other comprehensive income 7 | -3.1 | |
Other effects on capital | Actual 2020:Q2 | 2022:Q3 |
AOCI included in capital (billions of dollars) | -37.2 | -40.4 |
1. Average assets is the nine-quarter average of total assets. Return to table
2. Noninterest expense includes losses from operational-risk events and other real estate owned (OREO) costs. Return to table
3. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. Return to table
4. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Return to table
5. Trading and counterparty losses include mark-to-market and credit valuation adjustment (CVA) losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Return to table
6. Other losses/gains include projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Return to table
7. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. Return to table
*Note: The Federal Reserve revised this report on June 24, 2021:
- 33 participating firms, Risk-weighted assets, Projected 2022:Q3 has been revised from 10,271.9 to 10,271.8.
- 33 participating firms, Pre-provision net revenue, Billions of dollars has been revised from 363.2 to 362.9.
- 33 participating firms, Pre-provision net revenue, Percent of average assets has been revised from 2.0 to 1.9.
- 33 participating firms, Net interest income, Billions of dollars has been revised from 747.5 to 747.4.
- 33 participating firms, Noninterest income, Billions of dollars has been revised from 878.8 to 879.0.
- 33 participating firms, Noninterest expense, Billions of dollars has been revised from 1263.2 to 1,263.5.
- 33 participating firms, Net income before taxes, Billions of dollars has been revised from -198.2 to -198.4.
Table 10. Projected minimum common equity tier 1 capital ratio under the alternative severe scenario, 2020:Q3–2022:Q3 33 participating firms*
Percent
Firm | Stressed ratios with Dodd-Frank Act stress testing capital action assumptions |
---|---|
Ally Financial Inc. | 7.3 |
American Express Company | 13.7 |
Bank of America Corporation | 9.2 |
The Bank of New York Mellon Corporation | 12.2 |
Barclays US LLC | 15.2 |
BMO Financial Corp. | 6.5 |
BNP Paribas USA, Inc. | 10.8 |
Capital One Financial Corporation | 7.4 |
Citigroup Inc. | 9.8 |
Citizens Financial Group, Inc. | 6.2 |
Credit Suisse Holdings (USA), Inc. | 17.1 |
DB USA Corporation | 19.5 |
Discover Financial Services | 9.6 |
Fifth Third Bancorp | 7.5 |
The Goldman Sachs Group, Inc. | 8.3 |
HSBC North America Holdings Inc. | 5.1 |
Huntington Bancshares Incorporated | 8.1 |
JPMorgan Chase & Co. | 10.0 |
KeyCorp | 7.7 |
M&T Bank Corporation | 4.8 |
Morgan Stanley | 11.9 |
MUFG Americas Holdings Corporation | 10.7 |
Northern Trust Corporation | 12.6 |
The PNC Financial Services Group, Inc. | 9.6 |
RBC US Group Holdings LLC | 12.4 |
Regions Financial Corporation | 7.0 |
Santander Holdings USA, Inc. | 14.8 |
State Street Corporation | 11.5 |
TD Group US Holdings LLC | 15.6 |
Truist Financial Corporation | 7.7 |
UBS Americas Holding LLC | 16.7 |
U.S. Bancorp | 7.8 |
Wells Fargo & Company | 8.3 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratio presented is for the period 2020:Q3 to 2022:Q3.
Source: Federal Reserve estimates in the alternative severe scenario.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc. changed from 11.1 to 10.8.
Table 11.A. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the alternative severe scenario:Risk-based Category I, II, and III firms
Percent
Firm | Common equity tier 1 capital ratio |
Tier 1 capital ratio | Total capital ratio | Tier 1 leverage ratio | Supplementary leverage ratio1 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
|
Bank of America Corporation | 11.6 | 9.2 | 9.2 | 13.2 | 10.8 | 10.8 | 15.8 | 13.4 | 13.4 | 7.4 | 6.0 | 6.0 | 7.1 | 5.2 | 5.2 |
The Bank of New York Mellon Corporation | 12.7 | 14.1 | 12.2 | 15.6 | 16.9 | 15.1 | 16.6 | 18.0 | 16.2 | 6.2 | 6.8 | 6.0 | 8.2 | 8.0 | 7.2 |
Barclays US LLC | 17.3 | 15.7 | 15.2 | 20.4 | 18.9 | 18.4 | 23.4 | 22.2 | 21.7 | 9.5 | 8.7 | 8.5 | 9.1 | 7.7 | 7.5 |
Capital One Financial Corporation | 12.4 | 7.4 | 7.4 | 14.2 | 9.2 | 9.2 | 16.7 | 11.8 | 11.8 | 10.3 | 6.8 | 6.8 | 9.7 | 5.7 | 5.7 |
Citigroup Inc. | 11.8 | 10.6 | 9.8 | 13.3 | 12.2 | 11.4 | 16.5 | 15.5 | 14.8 | 7.1 | 6.5 | 6.0 | 6.7 | 5.2 | 4.8 |
Credit Suisse Holdings (USA), Inc. | 21.4 | 17.7 | 17.1 | 22.0 | 18.3 | 17.7 | 22.1 | 18.4 | 17.8 | 14.0 | 11.1 | 10.7 | 12.6 | 10.0 | 9.6 |
DB USA Corporation | 31.5 | 19.5 | 19.5 | 44.7 | 34.0 | 34.0 | 44.8 | 34.5 | 34.5 | 10.4 | 7.3 | 7.3 | 12.0 | 6.6 | 6.6 |
The Goldman Sachs Group, Inc. | 13.3 | 9.2 | 8.3 | 15.2 | 11.2 | 10.3 | 18.1 | 14.1 | 13.5 | 7.6 | 5.5 | 5.1 | 6.6 | 4.1 | 3.8 |
HSBC North America Holdings Inc. | 13.6 | 5.1 | 5.1 | 15.4 | 7.0 | 7.0 | 19.9 | 11.8 | 11.8 | 6.9 | 3.0 | 3.0 | 6.4 | 2.4 | 2.4 |
JPMorgan Chase & Co. | 12.4 | 10.3 | 10.0 | 14.3 | 12.3 | 11.9 | 16.7 | 14.7 | 14.4 | 6.9 | 5.9 | 5.7 | 6.8 | 4.8 | 4.7 |
Morgan Stanley | 16.5 | 12.3 | 11.9 | 18.6 | 14.4 | 14.1 | 21.0 | 17.0 | 16.8 | 8.1 | 6.2 | 6.0 | 7.3 | 4.9 | 4.7 |
Northern Trust Corporation | 13.4 | 12.8 | 12.6 | 14.6 | 13.9 | 13.8 | 16.5 | 16.3 | 16.3 | 7.6 | 7.3 | 7.3 | 9.0 | 8.3 | 8.2 |
The PNC Financial Services Group, Inc. | 11.3 | 9.6 | 9.6 | 12.4 | 10.8 | 10.8 | 14.9 | 13.2 | 13.2 | 9.4 | 8.2 | 8.1 | 9.3 | 6.9 | 6.9 |
State Street Corporation | 12.3 | 12.9 | 11.5 | 14.6 | 15.2 | 13.8 | 15.7 | 16.4 | 15.1 | 6.1 | 6.3 | 5.8 | 8.3 | 8.0 | 7.3 |
TD Group US Holdings LLC | 16.3 | 16.0 | 15.6 | 16.3 | 16.0 | 15.6 | 17.5 | 17.1 | 16.8 | 8.5 | 8.4 | 8.2 | 9.4 | 7.5 | 7.3 |
Truist Financial Corporation | 9.7 | 7.7 | 7.7 | 11.6 | 9.6 | 9.6 | 14.0 | 12.5 | 12.5 | 9.0 | 7.5 | 7.5 | 8.5 | 6.6 | 6.6 |
UBS Americas Holding LLC | 21.0 | 17.6 | 16.7 | 25.8 | 22.9 | 22.1 | 27.0 | 24.8 | 23.6 | 11.3 | 9.1 | 8.7 | 11.2 | 7.8 | 7.5 |
U.S. Bancorp | 9.0 | 7.9 | 7.8 | 10.6 | 9.5 | 9.4 | 12.8 | 11.7 | 11.6 | 8.0 | 7.2 | 7.1 | 7.1 | 5.8 | 5.7 |
Wells Fargo & Company | 11.0 | 8.4 | 8.3 | 12.6 | 10.0 | 9.9 | 15.9 | 13.4 | 13.3 | 8.0 | 6.3 | 6.2 | 7.5 | 5.2 | 5.1 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3.
1. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Return to table
Source: Federal Reserve estimates in the alternative severe scenario.
Table 11.B. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the alternative severe scenario: Risk-based Category IV firms*
Percent
Firm | Common equity tier 1 capital ratio |
Tier 1 capital ratio | Total capital ratio | Tier 1 leverage ratio | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual 2020:Q2 | Ending | Minimum | Actual 2020:Q2 | Ending | Minimum | Actual 2020:Q2 | Ending | Minimum | Actual 2020:Q2 | Ending | Minimum | |
Ally Financial Inc. | 10.1 | 7.3 | 7.3 | 11.9 | 9.1 | 9.1 | 13.8 | 11.1 | 11.1 | 8.9 | 6.8 | 6.8 |
American Express Company | 13.6 | 17.3 | 13.7 | 14.8 | 18.5 | 15.0 | 16.5 | 20.2 | 16.6 | 10.4 | 13.3 | 10.6 |
BMO Financial Corp. | 12.1 | 6.5 | 6.5 | 12.6 | 7.0 | 7.0 | 15.1 | 9.8 | 9.8 | 8.5 | 4.7 | 4.7 |
BNP Paribas USA, Inc. | 15.8 | 10.8 | 10.8 | 15.8 | 10.8 | 10.8 | 18.2 | 13.5 | 13.5 | 8.6 | 5.8 | 5.8 |
Citizens Financial Group, Inc. | 9.6 | 6.2 | 6.2 | 10.9 | 7.5 | 7.5 | 13.1 | 9.7 | 9.7 | 9.3 | 6.3 | 6.3 |
Discover Financial Services | 11.7 | 10.1 | 9.6 | 12.9 | 11.2 | 10.8 | 14.7 | 13.1 | 12.7 | 10.0 | 8.9 | 8.5 |
Fifth Third Bancorp | 9.7 | 7.5 | 7.5 | 11.0 | 8.7 | 8.7 | 14.2 | 12.0 | 12.0 | 8.2 | 6.5 | 6.5 |
Huntington Bancshares Incorporated | 9.8 | 8.1 | 8.1 | 11.8 | 10.0 | 10.0 | 13.8 | 12.1 | 12.1 | 8.9 | 7.5 | 7.5 |
KeyCorp | 9.1 | 7.7 | 7.7 | 10.5 | 9.1 | 9.0 | 12.8 | 11.3 | 11.3 | 8.8 | 7.6 | 7.6 |
M&T Bank Corporation | 9.5 | 4.8 | 4.8 | 10.7 | 6.0 | 6.0 | 13.0 | 8.4 | 8.4 | 8.6 | 4.8 | 4.8 |
MUFG Americas Holdings Corporation | 14.5 | 10.7 | 10.7 | 14.5 | 10.7 | 10.7 | 15.6 | 12.0 | 12.0 | 8.9 | 6.5 | 6.5 |
RBC US Group Holdings LLC | 16.1 | 12.4 | 12.4 | 16.1 | 12.4 | 12.4 | 16.8 | 13.7 | 13.7 | 9.9 | 7.5 | 7.5 |
Regions Financial Corporation | 8.9 | 7.0 | 7.0 | 10.4 | 8.5 | 8.5 | 12.6 | 10.7 | 10.7 | 8.4 | 6.9 | 6.9 |
Santander Holdings USA, Inc. | 14.3 | 15.6 | 14.8 | 15.7 | 16.9 | 16.2 | 17.1 | 18.3 | 17.6 | 12.4 | 13.5 | 12.6 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3.
Source: Federal Reserve estimates in the alternative severe scenario.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc., CET1 capital ratio (%), Ending has been revised from 11.1 to 10.8.
- BNP Paribas USA, Inc., CET1 capital ratio (%), Minimum has been revised from 11.1 to 10.8.
- BNP Paribas USA, Inc., Tier 1 capital ratio (%), Ending has been revised from 11.1 to 10.8.
- BNP Paribas USA, Inc., Tier 1 capital ratio (%), Minimum has been revised from 11.1 to 10.8.
- BNP Paribas USA, Inc., Total capital ratio (%), Ending has been revised from 13.8 to 13.5.
- BNP Paribas USA, Inc., Total capital ratio (%), Minimum has been revised from 13.8 to 13.5.
- BNP Paribas USA, Inc., Tier 1 leverage ratio (%), Ending has been revised from 6.0 to 5.8.
- BNP Paribas USA, Inc., Tier 1 leverage ratio (%), Minimum has been revised from 6.0 to 5.8.
Table 11.C. Capital ratios, actual 2020:Q2 and projected 2020:Q3–2022:Q3 under the alternative severe scenario: 33 participating firms
Percent
Firm | Common equity tier 1 capital ratio |
Tier 1 capital ratio | Total capital ratio | Tier 1 leverage ratio | Supplementary leverage ratio 1 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
Actual 2020:Q2 | Ending | Mini- mum |
|
33 participating firms | 12.2 | 9.9 | 9.7 | 13.8 | 11.5 | 11.4 | 16.4 | 14.1 | 14.1 | 7.9 | 6.5 | 6.4 | 7.4 | 5.3 | 5.2 |
Note: The capital ratios are calculated using the same capital action assumptions provided within the Dodd-Frank Act stress testing rule. See 12 C.F.R. § 252.56(b). These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. The minimum capital ratios are for the period 2020:Q3 to 2022:Q3.
1. Supplementary leverage ratio projections only include estimates for firms subject to Category I, II, or III standards. Return to table
Source: Federal Reserve estimates in the alternative severe scenario.
Figure 16. Change from 2020:Q2 to minimum CET1 ratio in the alternative severe scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of risk-weighted assets.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc. changed from 4.8 to 5.0.
Figure 17. Total loan loss rates in the alternative severe scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average loan balances.
Table 12. Projected losses, revenue, and net income before taxes through 2022:Q3 under the alternative severe scenario: 33 participating firms*
Billions of dollars
Firm | Sum of revenues | Minus sum of provisions and losses | Equals | Memo items | Other effects on capital | ||||
---|---|---|---|---|---|---|---|---|---|
Pre-provision net revenue1 | Other revenue 2 |
Provisions for loan and lease losses | Credit losses on investment securities (AFS/HTM) 3 | Trading and counterparty losses4 | Other losses/ gains 5 |
Net income before taxes |
Other compre- hensive income6 |
AOCI included in capital (2022:Q3) |
|
Ally Financial Inc. | 3.7 | 0.0 | 7.3 | 0.3 | 0.0 | 0.1 | -3.9 | 0.0 | 0.0 |
American Express Company | 18.9 | 0.0 | 12.2 | 0.0 | 0.0 | 0.0 | 6.6 | 0.0 | -2.9 |
Bank of America Corporation | 32.7 | 0.0 | 53.4 | 0.1 | 11.3 | 2.6 | -34.7 | 1.2 | -0.3 |
The Bank of New York Mellon Corporation | 7.6 | 0.0 | 1.7 | 0.2 | 1.4 | 0.0 | 4.3 | -0.8 | -2.7 |
Barclays US LLC | 4.6 | 0.0 | 4.1 | 0.0 | 1.0 | 0.0 | -0.5 | 0.0 | 0.0 |
BMO Financial Corp. | 0.7 | 0.0 | 7.2 | 0.0 | 0.0 | 0.0 | -6.5 | 0.0 | 0.0 |
BNP Paribas USA, Inc. | 0.8 | 0.0 | 5.3 | 0.0 | 0.0 | 0.0 | -4.6 | 0.0 | 0.0 |
Capital One Financial Corporation | 23.1 | 0.0 | 34.9 | 0.0 | 0.0 | 0.2 | -12.0 | 0.0 | -0.1 |
Citigroup Inc. | 48.2 | 0.0 | 40.2 | 0.5 | 10.3 | 1.8 | -4.6 | 0.0 | -35.5 |
Citizens Financial Group, Inc. | 3.7 | 0.0 | 8.6 | 0.0 | 0.0 | 0.1 | -5.0 | 0.0 | 0.0 |
Credit Suisse Holdings (USA), Inc. | 1.0 | 0.0 | 0.1 | 0.0 | 2.6 | 0.2 | -1.9 | 0.0 | 0.0 |
DB USA Corporation | -0.7 | 0.0 | 0.9 | 0.0 | 0.9 | 0.0 | -2.6 | 0.0 | -0.2 |
Discover Financial Services | 13.6 | 0.0 | 14.3 | 0.0 | 0.0 | 0.0 | -0.7 | 0.0 | 0.0 |
Fifth Third Bancorp | 5.7 | 0.0 | 8.7 | 0.0 | 0.0 | 0.0 | -3.0 | 0.0 | 0.0 |
The Goldman Sachs Group, Inc. | 16.0 | 0.0 | 12.7 | 0.0 | 20.6 | 4.9 | -22.2 | -0.2 | -0.5 |
HSBC North America Holdings Inc. | -0.4 | 0.0 | 7.6 | 0.1 | 1.2 | 0.0 | -9.2 | 0.0 | 0.1 |
Huntington Bancshares Incorporated | 3.2 | 0.0 | 4.3 | 0.0 | 0.0 | 0.1 | -1.2 | 0.0 | 0.0 |
JPMorgan Chase & Co. | 57.7 | 0.0 | 53.5 | 0.7 | 23.2 | 3.9 | -23.6 | -3.1 | 2.9 |
KeyCorp | 4.0 | 0.0 | 5.2 | 0.0 | 0.0 | 0.3 | -1.5 | 0.0 | 0.0 |
M&T Bank Corporation | 4.3 | 0.0 | 9.1 | 0.0 | 0.0 | 0.1 | -4.9 | 0.0 | 0.0 |
Morgan Stanley | 5.1 | 0.0 | 8.0 | 0.1 | 10.1 | 4.8 | -17.8 | 0.4 | 0.4 |
MUFG Americas Holdings Corporation | 1.3 | 0.0 | 5.3 | 0.1 | 0.0 | 0.1 | -4.1 | 0.0 | 0.0 |
Northern Trust Corporation | 2.1 | 0.0 | 2.3 | 0.1 | 0.0 | 0.0 | -0.3 | 0.0 | 0.3 |
The PNC Financial Services Group, Inc. | 9.3 | 0.0 | 13.4 | 0.1 | 0.0 | 0.4 | -4.7 | 0.0 | 0.0 |
RBC US Group Holdings LLC | 1.8 | 0.0 | 4.4 | 0.3 | 0.0 | 0.0 | -2.9 | 0.0 | 0.0 |
Regions Financial Corporation | 3.6 | 0.0 | 5.3 | 0.0 | 0.0 | 0.0 | -1.7 | 0.0 | 0.0 |
Santander Holdings USA, Inc. | 7.2 | 0.0 | 4.5 | 0.0 | 0.0 | 0.5 | 2.2 | 0.0 | 0.0 |
State Street Corporation | 4.0 | 0.0 | 1.6 | 0.1 | 1.0 | 0.0 | 1.3 | -0.4 | -0.9 |
TD Group US Holdings LLC | 9.8 | 0.0 | 9.9 | 0.2 | 0.0 | 0.0 | -0.3 | 0.0 | 0.0 |
Truist Financial Corporation | 12.1 | 0.0 | 18.2 | 0.1 | 0.0 | 0.4 | -6.6 | 0.0 | 0.0 |
UBS Americas Holding LLC | 2.4 | 0.0 | 1.3 | 0.0 | 1.2 | 0.1 | -0.2 | 0.0 | 0.0 |
U.S. Bancorp | 16.8 | 0.0 | 20.4 | 0.0 | 0.0 | 0.0 | -3.6 | 0.0 | -0.1 |
Wells Fargo & Company | 38.9 | 0.0 | 54.2 | 0.6 | 10.4 | 1.8 | -28.1 | -0.1 | -0.7 |
33 participating firms | 362.9 | 0.0 | 440.1 | 3.7 | 95.1 | 22.4 | -198.4 | -3.1 | -40.4 |
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding.
1. Pre-provision net revenue includes losses from operational-risk events and other real estate owned costs. Return to table
2. Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. Return to table
3. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses. Return to table
4. Trading and counterparty losses include mark-to-market and credit valuation adjustments losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities. Return to table
5. Other losses/gains includes projected change in fair value of loans held for sale and loans held for investment measured under the fair-value option, and goodwill impairment losses. Return to table
6. Other comprehensive income is only calculated for firms subject to Category I or II standards or firms that opt in to including accumulated other comprehensive income (AOCI) in their calculation of capital. Return to table
Source: Federal Reserve estimates in the alternative severe scenario.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc., Pre-provision net revenue, Billions of dollars has been revised from 1.0 to 0.8.
- BNP Paribas USA, Inc., Net income before taxes, Billions of dollars has been revised from -4.3 to -4.6.
- 33 participating firms, Pre-provision net revenue, Billions of dollars has been revised from 363.2 to 362.9.
- 33 participating firms, Net income before taxes, Billions of dollars has been revised from -198.2 to -198.4.
Table 13. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the alternative severe scenario: 33 participating firms
Billions of dollars
Firm | Loan losses |
First-lien mortgages, domestic |
Junior liens and HELOCs, domestic |
Commercial and industrial1 |
Commercial real estate, domestic |
Credit cards |
Other consumer2 |
Other loans 3 |
---|---|---|---|---|---|---|---|---|
Ally Financial Inc. | 7.7 | 0.2 | 0.0 | 2.3 | 0.3 | 0.0 | 4.7 | 0.2 |
American Express Company | 14.1 | 0.0 | 0.0 | 5.0 | 0.0 | 8.7 | 0.3 | 0.0 |
Bank of America Corporation | 57.9 | 4.4 | 0.9 | 17.0 | 11.8 | 16.0 | 1.4 | 6.3 |
The Bank of New York Mellon Corporation | 1.6 | 0.1 | 0.0 | 0.1 | 0.4 | 0.0 | 0.4 | 0.6 |
Barclays US LLC | 4.6 | 0.0 | 0.0 | 0.0 | 0.0 | 4.4 | 0.0 | 0.1 |
BMO Financial Corp. | 6.4 | 0.1 | 0.1 | 3.0 | 1.6 | 0.1 | 0.3 | 1.2 |
BNP Paribas USA, Inc. | 4.8 | 0.2 | 0.1 | 1.5 | 1.6 | 0.1 | 1.0 | 0.4 |
Capital One Financial Corporation | 39.7 | 0.0 | 0.0 | 4.6 | 1.9 | 25.2 | 6.8 | 1.1 |
Citigroup Inc. | 52.7 | 1.7 | 0.7 | 10.5 | 2.6 | 28.0 | 2.1 | 7.2 |
Citizens Financial Group, Inc. | 8.3 | 0.4 | 0.5 | 2.4 | 2.5 | 0.4 | 1.6 | 0.4 |
Credit Suisse Holdings (USA), Inc. | 0.2 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.1 |
DB USA Corporation | 0.8 | 0.1 | 0.0 | 0.0 | 0.6 | 0.0 | 0.0 | 0.1 |
Discover Financial Services | 17.4 | 0.0 | 0.1 | 0.0 | 0.0 | 15.6 | 1.6 | 0.0 |
Fifth Third Bancorp | 9.0 | 0.4 | 0.2 | 3.5 | 3.1 | 0.6 | 0.7 | 0.4 |
The Goldman Sachs Group, Inc. | 13.4 | 0.0 | 0.0 | 4.8 | 3.1 | 0.5 | 0.8 | 4.2 |
HSBC North America Holdings Inc. | 7.2 | 0.5 | 0.1 | 2.0 | 3.6 | 0.4 | 0.0 | 0.6 |
Huntington Bancshares Incorporated | 4.8 | 0.5 | 0.2 | 1.5 | 1.6 | 0.1 | 0.8 | 0.2 |
JPMorgan Chase & Co. | 67.1 | 4.1 | 0.6 | 18.7 | 4.7 | 25.7 | 2.2 | 11.2 |
KeyCorp | 5.7 | 0.3 | 0.2 | 2.3 | 1.6 | 0.2 | 0.5 | 0.5 |
M&T Bank Corporation | 8.8 | 0.5 | 0.1 | 1.3 | 5.7 | 0.1 | 0.7 | 0.3 |
Morgan Stanley | 7.1 | 0.5 | 0.0 | 1.2 | 2.1 | 0.0 | 0.2 | 3.0 |
MUFG Americas Holdings Corporation | 5.2 | 0.9 | 0.1 | 1.7 | 1.4 | 0.1 | 0.6 | 0.5 |
Northern Trust Corporation | 2.0 | 0.1 | 0.0 | 0.3 | 0.3 | 0.0 | 0.0 | 1.2 |
The PNC Financial Services Group, Inc. | 15.4 | 0.4 | 0.3 | 6.7 | 4.5 | 1.4 | 0.9 | 1.2 |
RBC US Group Holdings LLC | 3.8 | 0.4 | 0.0 | 0.9 | 1.5 | 0.0 | 0.2 | 0.7 |
Regions Financial Corporation | 5.8 | 0.5 | 0.2 | 2.1 | 1.7 | 0.2 | 0.7 | 0.5 |
Santander Holdings USA, Inc. | 8.5 | 0.2 | 0.2 | 0.8 | 1.0 | 0.1 | 6.1 | 0.2 |
State Street Corporation | 1.3 | 0.0 | 0.0 | 0.3 | 0.1 | 0.0 | 0.0 | 0.9 |
TD Group US Holdings LLC | 10.7 | 0.6 | 0.3 | 2.3 | 2.2 | 3.5 | 0.8 | 0.9 |
Truist Financial Corporation | 18.4 | 1.0 | 0.4 | 4.4 | 6.6 | 0.6 | 3.7 | 1.8 |
UBS Americas Holding LLC | 1.0 | 0.3 | 0.0 | 0.1 | 0.0 | 0.0 | 0.2 | 0.3 |
U.S. Bancorp | 22.1 | 1.3 | 0.5 | 6.6 | 6.3 | 4.6 | 1.5 | 1.3 |
Wells Fargo & Company | 57.8 | 4.7 | 0.7 | 13.2 | 17.9 | 7.5 | 3.7 | 10.0 |
33 participating firms | 491.2 | 24.4 | 6.6 | 121.4 | 92.4 | 144.1 | 44.6 | 57.7 |
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding.
1. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Return to table
2. Other consumer loans include student loans and automobile loans. Return to table
3. Other loans include international real estate loans. Return to table
Source: Federal Reserve estimates in the alternative severe scenario.
Table 14. Projected loan losses by type of loan for 2020:Q3–2022:Q3 under the alternative severe scenario: 33 participating firms
Percent of average loan balances
Firm | Loan losses 1 |
First-lien mortgages, domestic |
Junior liens and HELOCs, domestic |
Commercial and industrial 2 |
Commercial real estate, domestic |
Credit cards | Other consumer 3 |
Other loans 4 |
---|---|---|---|---|---|---|---|---|
Ally Financial Inc. | 6.6 | 1.3 | 3.7 | 8.0 | 5.4 | 0.0 | 7.2 | 14.4 |
American Express Company | 12.6 | 0.0 | 0.0 | 13.8 | 0.0 | 11.9 | 15.8 | 5.7 |
Bank of America Corporation | 5.8 | 1.9 | 2.3 | 5.9 | 15.5 | 19.0 | 1.9 | 3.3 |
The Bank of New York Mellon Corporation | 2.9 | 1.2 | 7.2 | 3.0 | 8.4 | 0.0 | 11.4 | 1.8 |
Barclays US LLC | 12.6 | 0.0 | 0.0 | 21.5 | 11.7 | 20.4 | 15.8 | 0.7 |
BMO Financial Corp. | 7.5 | 1.8 | 3.5 | 8.0 | 14.3 | 19.4 | 4.5 | 6.2 |
BNP Paribas USA, Inc. | 7.3 | 2.2 | 3.2 | 10.2 | 10.6 | 21.7 | 6.8 | 3.5 |
Capital One Financial Corporation | 15.9 | 2.4 | 6.6 | 12.9 | 6.0 | 25.4 | 10.8 | 5.6 |
Citigroup Inc. | 7.7 | 2.1 | 7.0 | 5.7 | 10.8 | 19.6 | 7.2 | 3.3 |
Citizens Financial Group, Inc. | 6.8 | 2.2 | 4.1 | 6.3 | 14.5 | 22.6 | 6.1 | 6.3 |
Credit Suisse Holdings (USA), Inc. | 1.6 | 0.0 | 0.0 | 0.0 | 45.2 | 0.0 | 15.8 | 0.6 |
DB USA Corporation | 6.8 | 2.4 | 5.9 | 1.2 | 15.9 | 0.0 | 7.5 | 2.6 |
Discover Financial Services | 19.5 | 2.4 | 9.5 | 25.7 | 20.2 | 22.3 | 9.1 | 5.6 |
Fifth Third Bancorp | 8.2 | 2.5 | 3.7 | 7.8 | 19.7 | 26.3 | 4.7 | 4.4 |
The Goldman Sachs Group, Inc. | 10.0 | 2.4 | 3.8 | 12.8 | 42.6 | 21.7 | 10.5 | 5.3 |
HSBC North America Holdings Inc. | 10.4 | 2.9 | 7.9 | 6.8 | 31.9 | 33.0 | 10.7 | 7.5 |
Huntington Bancshares Incorporated | 6.5 | 3.6 | 3.0 | 7.3 | 15.6 | 21.7 | 4.4 | 3.9 |
JPMorgan Chase & Co. | 7.0 | 1.9 | 2.0 | 10.3 | 3.9 | 20.2 | 3.6 | 4.8 |
KeyCorp | 5.7 | 2.7 | 3.8 | 6.0 | 10.8 | 21.7 | 4.7 | 3.0 |
M&T Bank Corporation | 9.7 | 3.3 | 3.5 | 7.3 | 15.5 | 21.7 | 6.7 | 5.1 |
Morgan Stanley | 4.4 | 1.6 | 3.8 | 8.6 | 16.8 | 0.0 | 0.9 | 3.7 |
MUFG Americas Holdings Corporation | 6.2 | 2.7 | 3.3 | 10.4 | 7.4 | 21.7 | 16.1 | 4.5 |
Northern Trust Corporation | 5.9 | 1.0 | 7.6 | 6.4 | 7.9 | 0.0 | 15.8 | 6.5 |
The PNC Financial Services Group, Inc. | 6.3 | 1.4 | 1.8 | 7.1 | 12.4 | 23.8 | 3.8 | 3.1 |
RBC US Group Holdings LLC | 6.5 | 3.0 | 3.3 | 11.2 | 10.2 | 21.7 | 12.9 | 3.8 |
Regions Financial Corporation | 6.8 | 2.6 | 4.2 | 7.9 | 12.0 | 17.7 | 12.2 | 3.1 |
Santander Holdings USA, Inc. | 9.5 | 2.7 | 3.7 | 5.0 | 6.6 | 21.7 | 15.9 | 2.5 |
State Street Corporation | 5.0 | 0.0 | 0.0 | 6.8 | 5.8 | 0.0 | 0.6 | 4.6 |
TD Group US Holdings LLC | 6.3 | 2.0 | 3.9 | 6.6 | 7.7 | 27.6 | 3.2 | 3.2 |
Truist Financial Corporation | 6.1 | 1.9 | 2.6 | 6.1 | 11.2 | 17.5 | 6.7 | 3.8 |
UBS Americas Holding LLC | 1.9 | 1.9 | 0.0 | 2.5 | 1.8 | 21.7 | 0.9 | 6.9 |
U.S. Bancorp | 7.3 | 1.8 | 3.9 | 7.5 | 16.3 | 21.7 | 3.5 | 4.7 |
Wells Fargo & Company | 6.3 | 1.8 | 1.9 | 7.3 | 14.0 | 21.0 | 5.1 | 5.0 |
33 participating firms | 7.3 | 2.0 | 3.0 | 7.6 | 11.9 | 20.3 | 6.0 | 4.1 |
Note: These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. Values may not sum precisely due to rounding.
1. Average loan balances used to calculate portfolio loss rates exclude loans held for sale, loans held for investment under the fair-value option, and PPP loans and are calculated over nine quarters. Return to table
2. Commercial and industrial loans include small- and medium-enterprise loans and corporate cards. Return to table
3. Other consumer loans include student loans and automobile loans. Return to table
4. Other loans include international real estate loans. Return to table
Source: Federal Reserve estimates in the alternative severe scenario.
Figure 18. PPNR rates in the alternative severe scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc. changed from 0.7 to 0.6.
Figure 19. Pre-tax net income rates in the alternative severe scenario
Note: Estimates are for the nine-quarter period from 2020:Q3–2022:Q3 as a percent of average assets.
*Note: The Federal Reserve revised this report on June 24, 2021:
- BNP Paribas USA, Inc. changed from -3.1 to -3.2.
References
38. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses, in accordance with FASB, Financial Instruments–Credit Losses (Topic 326), FASB ASU 2016-13 (Norwalk, Conn.: FASB, June 2016). Prior to the adoption of ASU 2016-13, securities credit losses were realized through other-than-temporary impairment (OTTI). Return to text
39. Additionally, losses are calculated based on the EAD, which includes both outstanding balances and any additional drawdown of the credit line that occurs prior to default, while loss rates are calculated as a percent of average outstanding balances over the projection horizon. Return to text
40. These estimates are conditional on the severely adverse scenario and conservative assumptions. They are not a supervisory estimate of the firms' current or expected legal liability. Return to text
41. As noted, credit card lending also tends to generate relatively high loss rates, so the higher PPNR rates at these firms do not necessarily indicate higher profitability. Return to text
42. For firms electing the CECL transition provision in 12 C.F.R. pt. 217, subpt. G, the starting capital position used to project the path of regulatory capital includes eligible transitional amounts intended to mitigate the adverse effect of differences between allowances under CECL and the incurred loss methodology. Projected capital levels do not incorporate changes in the transitional amounts during the transition period, which has a duration of three or five years depending on the transition election. Return to text
43. The Federal Reserve assumes that the allowance at the end of each quarter covers projected loan losses for four quarters into the future. The allowance at the end of the ninth quarter equals projected loan losses from quarters 10 through 13. Return to text
44. For firms that have adopted ASU 2016-13, the Federal Reserve incorporated its projection of expected credit losses on securities in the allowance for credit losses, in accordance with FASB, Financial Instruments–Credit Losses (Topic 326), FASB ASU 2016-13 (Norwalk, Conn.: FASB, June 2016). Prior to the adoption of ASU 2016-13, securities credit losses were realized through OTTI. Return to text
45. These estimates are conditional on the alternative severe scenario and on conservative assumptions. They are not a supervisory estimate of the firms' current or expected legal liability. Return to text
*Note: The Federal Reserve revised this report on June 24, 2021: the sentence "In the aggregate, the 33 firms are projected to generate $363 billion in PPNR cumulatively over the nine quarters of the projection horizon, equal to 2.0 percent of their combined average assets (see table 9)." has been revised to "In the aggregate, the 33 firms are projected to generate $363 billion in PPNR cumulatively over the nine quarters of the projection horizon, equal to 1.9 percent of their combined average assets (see table 9)."