Morgan Stanley Could Fall Short of Capital Rules, Goldman Says

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.

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