Ok, so this new study from the Federal Reserve Bank of Boston is from, um, the Federal Reserve, but the results are still compelling:
Our study indicates that the capital depletion during the recent financial crisis at large U.S. financial institutions was extensive and often rapid. Specifically, of the 26 large institutions examined in this study, half had losses that would deplete capital ratios by at least 200 basis points. Of that number, 12 institutions had capital ratio erosion in excess of 300 basis points and eight institutions had capital ratio erosion in excess of 450 basis points. When our estimates of capital depletion at large U.S. firms are compared to the adopted and proposed Basel III capital standards for the largest U.S. firms, capital requirements do not appear excessive as some observers have alleged.
The firms with the largest capital erosion are the usual suspects, in order starting with the worst: Washington Mutual, Countrywide, Merrill Lynch, National City, Ally Financial, Lehman Brothers, Wachovia, State Street.
- Markets Call Bull on Banks’ Warnings About Capital – Bloomberg (bloomberg.com)
- Basel III Requirements: A Look at Largest Banks (valuewalk.com)
- JPMorgan Calls Basel III Leverage Compliance ‘Manageable’ (thestreet.com)