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U.S. Banks' Securities Portfolios: Regulatory Changes Likely, but Positions Manageable for most Banks

This commentary reviews the U.S. Banks’ securities portfolios.

Key highlights include:
• Similar to other jurisdictions, DBRS Morningstar has undertaken a hypothetical stress test of U.S. banks' securities portfolios.
• In our severe and unlikely stress scenario, we find that most banks in our U.S. rating universe maintain capital levels above regulatory minimum requirements.
• We note that for the few banks that do not, these are larger regional banks and U.S. GSIBs where larger, more stable retail consumer deposit bases provide the bulk of balance sheet funding, and are less subject to bank runs.
• These banks are also able to meet liquidity requirements through robust alternative sources including the FHLB and Fed discount window.
• We note that the recent events are likely to result in changes to capital, stress testing, and reporting requirements


“We expect small and mid-sized banks to reevaluate credit extension and capital targets to maintain a more cautious profile until there is greater clarity on the direction of interest rates and further development of recession in the U.S. economy, as well as any changes to capital, stress-testing and securities portfolio valuation reporting requirements.,” said Rebecca Clarke, Vice President – Global FIG.