Goldman challenges Fed’s demand it hold more capital after stress test, FT reports By Reuters

(Reuters) – Goldman Sachs has appealed to the U.S. Federal Reserve over its results in the latest “stress test” by the Fed that is set to force the bank to hold more capital, the Financial Times reported on Sunday, citing people familiar with the matter.

The Federal Reserve’s annual stress test last month showed that the largest U.S. banks have enough capital to withstand severe economic and market turmoil, but companies have faced steeper default losses this year because of their riskier investment portfolios.

The banks tested saw losses of 17.6% in existing credit card loan balances, including Goldman Sachs, which recorded losses of 25.4%.

Goldman Sachs recorded one of the largest increases in its capital buffer (SCB) of 94 basis points.

How well a bank performs in stress tests determines the size of its stress capital buffer (SCB) — additional capital the Fed requires banks to hold to weather a hypothetical economic downturn.

Goldman Sachs said it would contact its regulator to better understand why SCB shares were soaring.

“This increase does not appear to reflect the strategic evolution of our business and the continued progress we have made to reduce our pressure loss intensity,” Chief Executive David Solomon said in a statement last month.

Goldman Sachs and the Federal Reserve did not immediately respond to Reuters requests for comment on the FT report.