Morgan Stanley and Bank of New York Mellon Corp. are the two U.S. banks likely to have the largest capital shortfall if regulators double the so-called leverage ratio without exempting cash and government bonds, Goldman Sachs Group Inc. analysts wrote in a note today.
Morgan Stanley’s Tier 1 leverage ratio is about 4.5 percent and Bank of New York’s 3.9 percent, the farthest behind the 6 percent requirement said to be under consideration, Goldman Sachs analysts led by Richard Ramsden said today in a note. The average Tier 1 leverage ratio for large banks is 5.5 percent, the analysts said.
U.S. regulators are considering doubling the amount of capital the largest banks must hold to 6 percent of total assets, four people with knowledge of the talks said last week. Last year, rulemakers proposed implementing a 3 percent international requirement for what’s known as the simple leverage ratio.
“Bank of New York and Morgan Stanley screen as outliers as outsized cash/repo books meaningfully inflate their asset bases,” the analysts wrote. Both companies are based in New York.