BK Bank of New York Mellon Corporation

By Sarah Krouse 

Bank of New York Mellon Corp. has the capital to keep lending in a severe economic downturn, the Federal Reserve calculated Thursday in the first stage of its annual stress tests.

At the low point of a hypothetical recession, BNY Mellon's common equity Tier 1 ratio, which is a measure of high-quality capital as a share of risk-weighted assets, was 10.5%, exceeding the 4.5% level the Fed views as a minimum, the central bank estimated.

BNY Mellon's Tier 1 leverage ratio, which measures high-quality capital as a share of all assets, was 5.5%, exceeding a 4% minimum.

The stress tests simulate a world-wide recession. The results were under the Fed's "severely adverse" scenario of financial stress, which this year includes a 10% U.S. unemployment rate, significant losses in corporate and commercial real estate lending portfolios, and negative rates on short-term U.S. Treasury securities.

The results will factor into the Fed's decision next week about whether to approve the bank's plan for rewarding shareholders with dividends or potential share buybacks. Banks whose capital ratios dropped close to minimum levels may choose to scale back their dividend or buyback plans before the Fed announces its final decision Wednesday. That day the banks can choose to announce whether they are raising their dividends or buying back more shares, important for enhancing shareholder returns.

Bank of New York Mellon, like rival State Street Corp., works on custodial services for Wall Street as well as investment management.

Write to Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

June 23, 2016 16:45 ET (20:45 GMT)

Bank of New York Mellon (NYSE:BK)
Historical Stock Chart
From Aug 2024 to Sep 2024

Bank of New York Mellon (NYSE:BK)
Historical Stock Chart
From Sep 2023 to Sep 2024