Foreign banks face larger capital hit in US stress tests

Key facts

• Foreign banks experienced a larger decline in Common Equity Tier 1 (CET1) capital during the Federal Reserve's latest stress tests.
• The median estimated CET1 capital depletion for foreign subsidiaries under the severely adverse scenario was 3 percentage points.
• US banks, in contrast, saw a median CET1 capital depletion of 1.3 percentage points.

Foreign banks operating in the United States are projected to face a more significant reduction in their core capital compared to domestic institutions, according to the Federal Reserve's latest round of stress tests. The estimated median depletion in Common Equity Tier 1 (CET1) capital for foreign subsidiaries under the Fed's severely adverse scenario was 3 percentage points. This contrasts with US banks, which are projected to experience a median CET1 capital depletion of 1.3 percentage points.