Schwab passes Fed stress test with 26.3% CET1 ratio

Charles Schwab's capital cushion stands more than five times the regulatory minimum after the Federal Reserve cleared its 2026 stress test, removing a key hurdle for shareholder payouts.

Charles Schwab Corp. disclosed a Common Equity Tier 1 ratio of 26.3 percent as of March 31, more than five times the 4.5 percent regulatory minimum, after the Federal Reserve's 2026 Comprehensive Capital Analysis and Review showed the broker-dealer can withstand a severe economic downturn. The Fed's supervisory severely adverse scenario tested Schwab over a nine-quarter horizon ending March 2028.

"The results highlight the strength of Schwab's capital position and diversified business model," Chief Financial Officer Mike Verdeschi said in a statement. "Our principles-based approach to managing the balance sheet establishes a foundation of safety and soundness from which we support our clients' evolving needs."

Schwab's stress capital buffer remained at the 2.5 percent minimum after the Fed voted earlier this year to maintain current requirements through 2027. The company's Tier 1 Leverage Ratio stood at 8.9 percent, down from 9.3 percent at year-end 2025. Across the broader banking industry, the Fed's analysis showed the largest U.S. banks can absorb $708 billion in losses under a severe downturn, underscoring the system's resilience.

The clean CCAR result allows Schwab to proceed with planned capital distributions including dividends and share buybacks without Federal Reserve objection. The company held $13.14 trillion in client assets across 39.5 million active brokerage accounts as of May 31, with 5.9 million workplace plan participants and 2.3 million banking accounts. With its CET1 ratio far exceeding the combined 7 percent minimum of regulatory capital plus the stress buffer, Schwab has substantial capacity to return capital to shareholders while maintaining a fortress balance sheet.

The last time the Fed imposed a capital restriction on a major bank was in 2020, when it capped dividend payments and share buybacks during the pandemic. That constraint was lifted in mid-2021 after additional stress tests confirmed the banking system's resilience. Schwab's current capital position compares favorably with large bank peers — JPMorgan Chase reported a CET1 ratio of 15.3 percent in the first quarter, while Bank of America stood at 12.1 percent, according to their respective disclosures. Schwab's 26.3 percent ratio reflects the relatively low-risk composition of its balance sheet, which is weighted toward brokerage client cash and government securities rather than commercial loans.

The Fed's next CCAR cycle in 2027 will determine whether the stress capital buffer remains at the 2.5 percent floor or adjusts higher. For now, Schwab's capital ratios give it flexibility to pursue both organic growth and potential acquisitions while maintaining its status as one of the best-capitalized institutions in U.S. financial services.

This article is for informational purposes only and does not constitute investment advice.