Fed to Ease Morgan Stanley Capital Requirement After Review (1)

The Federal Reserve lowered Morgan Stanley’s stress capital buffer requirement to 4.3%, down from an initial 5.1%, after a second look by the central bank.

The reduction, which takes effect on Wednesday, came after the Wall Street lender asked the Fedin August to reconsider its requirement under the annual stress-tests exercise, a multistep process that assesses how the nation’s largest lenders are likely to perform under a hypothetical recession.

“Based on an analysis of information presented by Morgan Stanley, the board determined that estimated losses in the bank’s fair value option loan portfolio were too conservative,” the Fed ...