PNC ANNOUNCES STRESS CAPITAL BUFFER (SCB) (2024)

FAQs

What is the stress capital buffer requirement? ›

the stress capital buffer (SCB) requirement, which is determined from the supervisory stress test results and is at least 2.5 percent;2 and • if applicable, a capital surcharge for global systemically important banks (G-SIBs), which is at least 1.0 percent.

The Basel III common equity Tier 1 capital ratio was an estimated 9.9% at December 31, 2023 and 9.8% at September 30, 2023. PNC's average LCR for the three months ended December 31, 2023 was 107%, exceeding the regulatory minimum requirement throughout the quarter.

NEW YORK, NY, June 30, 2023 — On Wednesday, June 28, the Federal Reserve notified the firm of the Stress Capital Buffer (“SCB”) for The Goldman Sachs Group, Inc. (NYSE: GS) of 5.5%, resulting in a Standardized Common Equity Tier 1 (“CET1”) ratio requirement of 13.0%, which will become effective on October 1, 2023.

William Demchak owns 575,843 shares of PNC, a stake worth about $87 million as of April 2024. Demchak serves as PNC's CEO and chairman of the board. Michael Lyons owns 210,095 shares of PNC. Lyons is president of PNC and is the head of corporate and institutional banking.

The "stress capital buffer," or SCB, integrates the Board's stress test results with its non-stress capital requirements. As a result, required capital levels for each firm would more closely match its risk profile and likely losses as measured via the Board's stress tests.

Board of Governors of the Federal Reserve System

The Federal Reserve Board uses the stress test to set the stress capital buffer (SCB) requirement, which integrates the stress test with the non-stress capital requirements into one forward-looking and risk-sensitive framework.

PNC is required to make public disclosures regarding its regulatory capital and risk-weighted assets in accordance with the final rules adopted by the U.S. banking agencies to implement the Basel III regulatory capital framework.

Tier 1 capital is the primary funding source of the bank and consists of shareholders' equity and retained earnings. Tier 2 capital includes revaluation reserves, hybrid capital instruments and subordinated term debt, general loan-loss reserves, and undisclosed reserves.

The tier 1 leverage ratio relates a bank's core capital to its total assets in order to judge liquidity. Tier 2 capital is supplementary capital that includes items like revaluation reserves, undisclosed reserves, hybrid instruments, and subordinated term debt.

The stress test also determines stress capital buffers (SCBs), capital cushions that large banks are required to hold in addition to the 4.5% minimum. SCBs mostly reflect simulated losses at individual banks and are subject to a minimum of 2.5%.

How is SCB calculated? ›

Under the SCB rule, a banking organization's stress capital buffer is calculated as the sum of (i) the difference between the organization's starting and minimum projected common equity tier 1 capital ratios as calculated under the severely adverse scenario specified in the supervisory stress test and (ii) four ...

On June 28, 2023, the Board of Governors of the Federal Reserve System released its CCAR 2023 results, as a result of which Morgan Stanley expects to be subject to a Stress Capital Buffer (SCB) of 5.4% from October 1, 2023 to September 30, 2024.

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PITTSBURGH, Oct. 12, 2021 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today announced it has completed the conversion of 2.6 million customers, 9,000 employees and nearly 600 branches across seven states from BBVA USA to PNC Bank.

PNC Bank is a subsidiary of The PNC Financial Services Group, Inc., a U.S.-based bank holding company headquartered in Pittsburgh, Pennsylvania, and founded in 1845.

Capital buffers are a key element of the regulatory framework, inter alia aimed at enabling banks to absorb losses while maintaining the provision of key services to the economy.

Capital conservation buffer (CCB): The proposal requires banks to maintain a CCB of 2.5% of risk-weighted assets with only CET1 capital. This buffer is in addition to the minimum CET1 ratio of 4.5%, effectively raising the CET1 requirement to 7%.

Furthermore, capital buffers should generally increase the resilience of the banking system and certain elements of the framework also aim at dampening the financial cycle. Thereby, capital buffers' overarching objective is to safeguard the stability of the financial system.

Understanding CAR. The capital adequacy ratio is calculated by dividing a bank's capital by its risk-weighted assets. Currently, the minimum ratio of capital to risk-weighted assets is 8% under Basel II and 10.5% (which includes a 2.5% conservation buffer) under Basel III.