Goldman Sachs (NYSE:GS) has lodged an appeal with the U.S. Federal Reserve challenging the regulator’s most recent “stress test”, which is set to force the bank to hold a greater amount of capital, the Financial Times reported on Sunday, citing people familiar with the matter.
The Fed’s stress test determines the amount of capital that large banks will be required to set aside to help them weather a financial shock.
The Federal Reserve’s annual stress test last month demonstrated that even though large banks would endure greater losses than 2023’s test, they are well positioned to weather a severe recession.
The 31 banks tested saw losses of 17.6% to existing loan balances and Goldman Sachs (GS) recorded 25.4% in losses.
Last month, the Fed notified Goldman Sachs (GS) of the Stress Capital Buffer of 6.4%, resulting in a Standardized Common Equity Tier 1 ratio requirement of 13.9%, which will become effective on October 1, 2024.
“This increase does not seem to reflect the strategic evolution of our business and the continuous progress we’ve made to reduce our stress loss intensity, which the Federal Reserve had recognized in the last three tests,” said CEO David Solomon in a statement last month.
Solomon added that the bank will continue to engage with the Fed to better understand its determinations.