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Goldman's key capital ratio performs better in own stress test

A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012. REUTERS/Brendan McDermid
A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012. REUTERS/Brendan McDermid

NEW YORK (Reuters) - Goldman Sachs Group Inc's key capital ratio would be higher in its own stress test compared with a projection released by the Federal Reserve, according to a document posted on the bank's website on Thursday.

Goldman said its Tier 1 common ratio would drop to a minimum of 8.6 percent under extremely stressed economic conditions, whereas the Fed projected that ratio would drop as low as 5.8 percent for the Wall Street bank.

In order to pass the Fed's stress test, 18 large U.S. banks had to meet a minimum Tier 1 common ratio of 5 percent.

Goldman and its Wall Street rival Morgan Stanley fared worse than any banks except Ally Financial Inc , according to the Fed's analysis. Most banks later said their internal calculations turned up better results.

Not all of Goldman's calculations resulted in higher capital ratios. Its total risk-based capital ratio fell to a minimum of 13.2 percent under its own analysis, whereas the Fed projected that ratio could fall to a minimum of 11.3 percent for Goldman.

Goldman also projected lower losses in a stress scenario, but noted that the stress test does not take into consideration actions that management could take to reduce expenses, such as cutting compensation.

(Reporting By Lauren Tara LaCapra; Editing by Gary Hill)

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