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Morgan Stanley Could Fall Short of Capital Rules, Goldman Says

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June 24 (Bloomberg) -- 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.

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editors responsible for this story: Christine Harper at charper@bloomberg.net; David Scheer at dscheer@bloomberg.net