Wells Fargo & Company (NYSE: WFC) today released the results of its company-run stress test conducted in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA). The results can be found at: https://www.wellsfargo.com/invest_relations/stress-test-reports.
The Federal Reserve has published the results of its supervisory-run DFA stress tests for thirty of the nation’s largest banks, including Wells Fargo, using the DFA standardized capital distribution requirements. Under a hypothetical severely adverse economic scenario developed by the Federal Reserve and using the standardized capital distribution assumptions specified in the DFA, the Federal Reserve estimated that for the nine-quarter test horizon ending December 31, 2015, Wells Fargo’s lowest and ending Tier 1 Common Equity ratio under Basel I would each be 8.2%. Using the same economic scenario and capital distribution assumptions, we estimate that our lowest and ending Tier 1 Common Equity ratio would be 9.7% and 11.0%, respectively.
In addition to the Tier 1 Common Equity ratio calculated under Basel I, the Federal Reserve has added into the stress test analysis a Common Equity Tier 1 calculation under Basel III using the standardized capital risk-based approach. The Federal Reserve estimated that for the nine-quarter test horizon ending December 31, 2015, Wells Fargo’s lowest and ending Common Equity Tier 1 ratio under Basel III would each be 7.4%. We estimate that our lowest and ending Common Equity Tier 1 ratio under the same economic scenario and capital distribution assumptions would be 9.2% and 9.8%, respectively.
Under both our and the Federal Reserve’s calculations, Wells Fargo’s capital ratios under Basel I and Basel III remain above the Federal Reserve’s minimum Tier 1 Common Equity ratio of 5.0% and Common Equity Tier 1 ratio of 4.5%, respectively. The Federal Reserve has indicated that on March 26, 2014, it will release its estimates of Wells Fargo’s capital ratios using the same financial assumptions, but with our planned capital actions for the two-year forecast horizon.
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