Fed Lowers Morgan Stanley Stress Capital Buffer to 4.3%

The Federal Reserve reduced Morgan Stanley's Stress Capital Buffer from 5.1% to 4.3%, effective Oct. 1, 2025, after the bank requested reconsideration. The Fed's Board found Morgan Stanley had been too conservative estimating losses in its fair-value option loan portfolio and that the preliminary buffer was overstated after measuring certain counterparty losses using the bank's second-largest counterparty. The unanimous Board decision came just before new capital rules take effect Oct. 1. The revised buffer implies an aggregate U.S. Basel III standardized CET1 ratio of 11.8% for Morgan Stanley (the firm reported a 15.0% CET1 ratio as of June 30). Morgan Stanley said it appreciated the Fed's reconsideration and will continue to support clients, invest in its businesses and grow its dividend. The Fed said it will consider further model refinements and greater transparency in the stress-testing process as part of upcoming proposals.