Updated with market close information.

NEW YORK (

TheStreet

) --

Morgan Stanley

(MS) - Get Report

was the financial loser among the largest U.S. banks, with shares sliding 6% to close at $14.15.

The

Wall Street Journal

reported that the

Federal Reserve

was expected soon to announce it would follow the same enhanced capital requirements set out by the Basel Committee for large banks, which would lead to required Tier 1 common equity ratios of at least 7% by January 2019, with an extra capital cushion of up to 2.5% for "systemically important financial institutions," with

Citigroup

(C) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

both being required to hold the maximum capital buffer.

Despite being likely to face a smaller capital buffer than Citigroup and JPMorgan, Morgan Stanley continued its recent pattern of volatility, despite the company's well-received

$1.8 billion settlement

last week with

MBIA

(MBI) - Get Report

over commercial mortgage-backed securities litigation.

Credit Suisse analyst Howard Chen said that Morgan Stanley's settlement with MBIA removed "the single largest legacy issue" for the company, and improved the investment bank's "capital flexibility, accelerating the firm's Basel III readiness at a critical moment," heading into the early-January submission of a capital plan for the

Federal Reserve

to use in its annual stress tests, which this time around will feature a particularly

nasty set of adverse economic assumptions

.

Chen is way out in front of other analysts, with a 12-month price target of $28 for Morgan Stanley's shares, while the mean price target among analysts polled by FactSet is $22.76.

Interested in more on Morgan Stanley? See TheStreet Ratings' report card for

this stock

.

The

KBW Bank Index

(I:BKX)

on Monday declined 3% to close at 36.69, with the 24 index components showing declines of at least 1%.

Shares of Bank of America fell 4% to close at $4.99, for their first close below $5 since March 11, 2009. According to sources cited by the

Wall Street Journal

, Bank of America faces 2% Basel III capital buffer, as a global systemically important financial institution.

Some outlets are having great fun in pointing out that Warren Buffett's

Berkshire Hathaway

(BRK.B) - Get Report

is "underwater," on the 700 million warrants he was granted back in August, to purchase Bank of America common shares at $7.14, in September, when Berkshire purchased $5 billion in BAC preferred shares.

Hogwash.

Buffett is gleefully collecting on the outrageous 10% coupon Bank of America agreed to pay on the preferred, and he never has to exercise the warrants.

Interested in more on Bank of America? See TheStreet Ratings' report card for

this stock

.

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--

Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here:

Philip van Doorn

.

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http://twitter.com/PhilipvanDoorn

.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.