A Stress Buffer Cut From 6.0% to 4.3%Narrow moat

Morgan Stanley (MS) — moat facet

The Federal Reserve cut Morgan Stanley's stress buffer from 6.0% to 4.3%, a regulatory judgement that its business mix got safer.

For a bank, the regulator's view of risk sets how much capital must be held and therefore what return can be earned. Morgan Stanley's stress capital buffer, set by the Federal Reserve's annual stress test, was 5.7% in 20211, 5.8% in 20222, 5.4% in 20233, 6.0% in 2024 and 4.3% from October 20254. The firm says the 4.3% requirement holds "until October 1, 2027"5.

Stress capital buffer (%)5.7%20215.8%20225.4%20236.0%20244.3%2025Morgan Stanley Forms 10-K FY2021-FY2025
The lowest buffer in five years.

The cut lowered the firm's Standardized CET1 requirement to 11.8% from 13.5% a year earlier67. With an actual ratio of 15.0% at the end of 2025, the firm counted about 320 basis points of excess CET1 capital8. In June 2026 the ratio was 14.8%9.

Less required capital means the same profit earns more on equity, or more capital can be returned. It is also a judgement about Morgan Stanley's business mix: a firm with more wealth fees and fewer trading losses under stress needs a smaller buffer.

The 2026 stress test results "do not impact the Firm’s Stress Capital Buffer"10. The G-SIB surcharge, 3.0%, may rise to 3.5% but not before 1 January 202811.

The CET1 ratio itself has drifted down as the firm used its capital. It was 17.4% in 2020, 16.0% in 2021, 15.3% in 2022, 15.2% in 2023, 15.9% in 2024 and 15.0% in 2025121314. The lower requirement lets the ratio fall further without breaching the minimum, which is where the buyback capacity comes from.

What matters from here is the excess over the requirement. It was about 300 basis points in June 202615; a reset in 2027 that raised the buffer back toward 6% would cut that in half and slow the buybacks.

Moat trajectory: Widening

SCB 6.0% (2024) to 4.3% (Oct 2025); requirement 13.5% to 11.8%.

The number that tests this moat
Reported
CET1 ratio over the requirement, latest quarter
14.8% vs 11.8% required (June 2026)

The capital the firm can return or deploy; a buffer reset that halved the gap would slow buybacks.

Source: Morgan Stanley Q2 2026 earnings release ↗
⚠ Threats to the moat
⚠ THREAT 01
The Buffer Resets in 2027
Morgan Stanley's low stress buffer lasts until October 2027, and one bad test could take back most of its excess capital.
References
  1. ReportedMorgan Stanley's stress capital buffer, set by the Federal Reserve's annual stress test, was 5.7% in 2021, 5.8% in 2022, 5.4% in 2023, 6.0% in 2024 and 4.3% from October 2025.
    Morgan Stanley Form 10-K for fiscal 2021 - the Eaton Vance acquisition, segment results for 2019-2021 after reclassification, and the 2021 stress capital buffer. — FY2021 · publ. February 2022 · source ↗
  2. ReportedMorgan Stanley's stress capital buffer, set by the Federal Reserve's annual stress test, was 5.7% in 2021, 5.8% in 2022, 5.4% in 2023, 6.0% in 2024 and 4.3% from October 2025.
    Morgan Stanley Form 10-K for fiscal 2022 - net revenues, net income, efficiency ratio and capital ratios for 2022. — FY2022 · publ. February 2023 · source ↗
  3. ReportedMorgan Stanley's stress capital buffer, set by the Federal Reserve's annual stress test, was 5.7% in 2021, 5.8% in 2022, 5.4% in 2023, 6.0% in 2024 and 4.3% from October 2025.
    Morgan Stanley Form 10-K for fiscal 2023 - segment results for 2021-2023, Wealth Management metrics for 2021-2023, the block-trading settlements, and 2023 charges. — FY2023 · publ. February 2024 · source ↗
  4. ReportedMorgan Stanley's stress capital buffer, set by the Federal Reserve's annual stress test, was 5.7% in 2021, 5.8% in 2022, 5.4% in 2023, 6.0% in 2024 and 4.3% from October 2025.
    Morgan Stanley Form 10-K for fiscal 2025 - capital, the stress capital buffer, dividends and share repurchases. — FY2025 · publ. 19 February 2026 · source ↗
  5. ReportedThe firm says the 4.3% requirement holds "until October 1, 2027".
    Morgan Stanley Form 8-K exhibit 99.1, dividend increase to $1.15, a $20 billion multi-year buyback and the stress capital buffer after the 2026 stress test. — June 2026 · publ. 24 June 2026 · source ↗
  6. ReportedThe cut lowered the firm's Standardized CET1 requirement to 11.8% from 13.5% a year earlier.
    Morgan Stanley Form 10-K for fiscal 2025 - capital, the stress capital buffer, dividends and share repurchases. — FY2025 · publ. 19 February 2026 · source ↗
  7. ReportedThe cut lowered the firm's Standardized CET1 requirement to 11.8% from 13.5% a year earlier.
    Morgan Stanley Form 10-Q for the quarter ended 30 June 2026 - capital requirements, legal proceedings including the cash-sweep litigation, and the 2026 bank-entity reorganisation. — Q2 2026 · publ. 4 August 2026 · source ↗
  8. ReportedWith an actual ratio of 15.0% at the end of 2025, the firm counted about 320 basis points of excess CET1 capital.
    Morgan Stanley strategic update, The Integrated Firm: Executing on a Higher Plane, Form 8-K exhibit 99.3 - ROTCE 2016-2025, firmwide goals, five-year Wealth Management aggregates and wallet share. — 2016-2025 · publ. 15 January 2026 · source ↗
  9. ReportedIn June 2026 the ratio was 14.8%.
    Morgan Stanley second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - firm results, returns and the chief executive's statement. — Q2 2026 · publ. 15 July 2026 · source ↗
  10. ReportedThe 2026 stress test results "do not impact the Firm’s Stress Capital Buffer".
    Morgan Stanley Form 8-K exhibit 99.1, dividend increase to $1.15, a $20 billion multi-year buyback and the stress capital buffer after the 2026 stress test. — June 2026 · publ. 24 June 2026 · source ↗
  11. ReportedThe G-SIB surcharge, 3.0%, may rise to 3.5% but not before 1 January 2028.
    Morgan Stanley Form 10-K for fiscal 2025 - capital, the stress capital buffer, dividends and share repurchases. — FY2025 · publ. 19 February 2026 · source ↗
  12. ReportedIt was 17.4% in 2020, 16.0% in 2021, 15.3% in 2022, 15.2% in 2023, 15.9% in 2024 and 15.0% in 2025.
    Morgan Stanley Form 10-K for fiscal 2025 - capital, the stress capital buffer, dividends and share repurchases. — FY2025 · publ. 19 February 2026 · source ↗
  13. ReportedIt was 17.4% in 2020, 16.0% in 2021, 15.3% in 2022, 15.2% in 2023, 15.9% in 2024 and 15.0% in 2025.
    Morgan Stanley Form 10-K for fiscal 2022 - net revenues, net income, efficiency ratio and capital ratios for 2022. — FY2022 · publ. February 2023 · source ↗
  14. ReportedIt was 17.4% in 2020, 16.0% in 2021, 15.3% in 2022, 15.2% in 2023, 15.9% in 2024 and 15.0% in 2025.
    Morgan Stanley Form 10-K for fiscal 2023 - segment results for 2021-2023, Wealth Management metrics for 2021-2023, the block-trading settlements, and 2023 charges. — FY2023 · publ. February 2024 · source ↗
  15. Moat Explorer calcIt was about 300 basis points in June 2026; a reset in 2027 that raised the buffer back toward 6% would cut that in half and slow the buybacks.
    Moat Explorer calculation from Morgan Stanley's reported figures ($ millions unless stated). Wealth Management: asset management revenue share 18,627 / 31,754 = 58.7%; net interest income share 7,911 / 31,754 = 24.9%. Client assets change 2025: 7,381 - 6,194 = 1,187 billion; net new assets 356.3 / 1,187 = 30%, so market and other changes 830.7 billion, about 70%. Fee-based share of advisor-led assets 2,347 / 4,758 = 49.3% (2024); 2,753 / 5,715 = 48.2% (2025); 3,022 / 6,273 = 48.2% (June 2026). Transactional revenue 2,473 / 4,259 - 1 = -42% (2022). Wealth Management pre-tax margins: 2015 3,332 / 15,100 = 22.1%; 2020 4,387 / 19,086 = 23.0%; 2021 6,181 / 24,243 = 25.5%; 2022 6,583 / 24,417 = 27.0%; 2023 6,530 / 26,268 = 24.9%; 2024 7,740 / 28,420 = 27.2%; 2025 9,293 / 31,754 = 29.3%. Wealth Management revenue growth (31,754 / 15,100)^(1/10) - 1 = 7.7% a year. Self-directed assets 1,667 / 1,437 - 1 = 16%; households 8.5 / 8.3 - 1 = 2.4%; daily average revenue trades 1,029 / 837 - 1 = 23% (2025) and 1,278 / 1,029 - 1 = 24% (Q2 2026); 1,278 / 759 = 1.68 since 2023. Wealth Management bank loans 181 / 146 - 1 = 24% (2022-2025). Balance sheet 2025: loans 289,038 / 246,814 - 1 = 17.1%; deposits 415,523 / 376,007 - 1 = 10.5%; borrowings 348,935 / 288,819 - 1 = 20.8%. Firm loans June 2026 315,653 / 289,038 - 1 = 9.2%; 315,653 / 246,814 - 1 = 28% since end-2024. Uninsured deposits 84,201 / 415,523 = 20.3%. Net new assets Q2 2026 excluding IPO-related inflows: just over half of 148.1 billion was IPO-related, so the rest is below 148.1 / 2 = 74.05 billion. Segments: sum of segment net revenues 2025 33,080 + 31,754 + 6,525 = 71,359, less firm net revenues 70,645 = 714 of eliminations; eliminations as reported each year 2015 213, 2016 290, 2017 290, 2018 463, 2019 467, 2020 539, 2021 541, 2022 517, 2023 555, 2024 600, 2025 714. Wealth and Investment Management share of segment revenue: 2015 (15,100 + 2,315) / 35,368 = 49.2%; 2023 (26,268 + 5,370) / 54,698 = 57.8%; 2025 (31,754 + 6,525) / 71,359 = 53.6%. Institutional Securities share of segment revenue 2025 33,080 / 71,359 = 46.4%. Share of firm pre-tax income 2025: Institutional Securities 11,237 / 21,954 = 51.2%; Wealth Management 9,293 / 21,954 = 42.3%; Investment Management 1,478 / 21,954 = 6.7%. Share of segment pre-tax income: 2021 Institutional Securities 11,814 / (11,814 + 6,181 + 1,678) = 11,814 / 19,673 = 60.1%; 2023 4,476 / 11,848 = 37.8%, Wealth and Investment Management 6,530 + 842 = 7,372 = 62.2%; 2025 Institutional Securities 11,237 / 22,008 = 51.1%, Wealth and Investment Management 10,771 / 22,008 = 48.9%; 2015 Wealth and Investment Management (3,332 + 492) / 8,495 = 45.0%. Q2 2026 Institutional Securities 4,262 / 7,348 = 58.0%; revenue 11,040 / 7,643 - 1 = 44%. Institutional Securities pre-tax margins: 2015 4,671 / 17,953 = 26.0%; 2021 11,814 / 29,833 = 39.6%; 2022 6,715 / 24,393 = 27.5%; 2023 4,476 / 23,060 = 19.4%; 2024 8,749 / 28,080 = 31.2%; 2025 11,237 / 33,080 = 34.0%; growth (33,080 / 17,953)^(1/10) - 1 = 6.3% a year. Equity 15,631 / 9,986 - 1 = 57% (2023-2025); 15,631 / 12,230 - 1 = 27.8% (2025); 15,631 / 70,645 = 22.1% of firm; 15,631 / 33,080 = 47.3% of segment. Fixed income 8,716 / 8,418 - 1 = 3.5%; 8,716 / 33,080 = 26.3% of segment. Equity underwriting 851 / 4,437 - 1 = -81% (2022). Investment Management margins: 2021 1,678 / 6,220 = 27.0%; 2023 842 / 5,370 = 15.7%; 2025 1,478 / 6,525 = 22.7%; fees 6,068 / 5,231 - 1 = 16% (2023-2025); Parametric 524 / 336 - 1 = 56%. Regions: Asia 9,420 / 6,434 - 1 = 46%; Asia 9,420 / 70,645 = 13.3% (2025); 6,434 / 54,143 = 11.9% (2023); Americas 52,897 / 70,645 = 74.9% (2025); Q2 2026 Americas 15,046 / 21,348 = 70.5%, Asia 3,930 / 21,348 = 18.4%. Capital and valuation: CET1 excess 14.8% - 11.8% = 3.0 points (June 2026). Goodwill and intangibles 16,726 + 6,010 = 22,736. Acquisitions 11.9 + 8.7 = 20.6 billion. Compensation 29,216 / 48,342 = 60.4% of non-interest expenses; 29,216 / 26,178 - 1 = 11.6%. Dividends per share 3.85 / 0.55 = 7.0 times. Payout 2025 (6,147 + 4,585) / 16,249 = 66%. Buyback price 197.64 / 85.35 = 2.3 times. Total assets 1,675,057 / 1,215,071 - 1 = 37.9% (end-2024 to June 2026); common equity 106,579 / 94,761 - 1 = 12.5%. MUFG stake 380,010,887 shares x $196.31 = about $74.6 billion. Trailing twelve months to June 2026: net revenues 70,645 - 34,531 + 41,928 = 78,042; net income 16,861 - 7,854 + 11,148 = 20,155; diluted EPS 10.21 - 4.73 + 6.90 = 12.38. P/E = market value / net income: 2023 153.05 / 9.087 = 16.8; 2024 202.54 / 13.390 = 15.1; 2025 282.15 / 16.861 = 16.7; September 2026 308.32 / 20.155 = 15.3; price to sales 308.32 / 78.042 = 3.95. Revenue growth (70,645 / 35,155)^(1/10) - 1 = 7.2% a year. Wealth Management 2025: revenue 31,754 / 28,420 - 1 = 11.7%, pre-tax income 9,293 / 7,740 - 1 = 20.1%; bank loans 181 / 160 - 1 = 13.1%, deposits 408 / 370 - 1 = 10.3%; stock plan unvested 658 / 534 - 1 = 23% (six months). Investment banking 7,619 / 10,272 - 1 = -26% (2025 vs 2021). Tangible book value per share 50.00 / 44.57 - 1 = 12.2%. Non-compensation expenses 19,126 / 17,723 - 1 = 7.9%; net revenues 70,645 / 61,761 - 1 = 14.4%. Revenue per employee 70,645 / 83,000 = about 0.85 million. Vanguard, BlackRock and State Street 6.9% + 5.7% + 7.2% = 19.8% of the stock. Diluted EPS growth (10.21 / 2.90)^(1/10) - 1 = 13.4% a year. Q2 2026 Institutional Securities share of segment revenue 11,040 / (11,040 + 8,856 + 1,646) = 11,040 / 21,542 = 51.2%. First half 2026: Institutional Securities pre-tax income 8,423 / 5,392 - 1 = 56%, share of firm pre-tax income 8,423 / 14,359 = 58.7% (H1 2025 5,392 / 10,166 = 53.0%); Wealth Management pre-tax income 5,288 / 4,151 - 1 = 27%. Q2 2026 Wealth Management revenue 8,856 / 7,764 - 1 = 14%; asset management revenue 5,261 / 4,411 - 1 = 19%; firm revenue 21,348 / 16,792 - 1 = 27%; headcount 82,944 / 80,393 - 1 = 3.2%. Investment Management pre-tax income (1,478 - 870) / 8,700 = 7.0% of the Eaton Vance price. Net income 16,861 / 6,127 - 1 = 175%; shareholders equity 111,632 / 75,182 - 1 = 48%. Self-directed plus stock plan unvested assets June 2026 1,811 + 658 = 2,469 billion. Average diluted shares 1,592 / 1,646 - 1 = -3.3%. Total client assets 9,276 / 7,860 - 1 = 18%. Market value 308.32 / 153.05 = 2.0 times (end-2023 to September 2026). 2023 charges 249 + 353 + 293 = 895. Net income 9,087 / 15,034 - 1 = -40% (2021-2023). Borrowings 348,935 / 288,819 - 1 = 21%. Loans to deposits 289,038 / 415,523 = 70%. Compensation 29,216 / 70,645 = 41% of net revenues (2025). Net new assets 2025 quarterly average 356.3 / 4 = 89.1 billion. Forecast extrapolation: 2026 revenue 41,928 x 2 = 83,856; 2026 EPS 196.31 / 15.14 = 12.97; 2027 83.9 x 1.072 = 89.9 and 12.97 x 1.072 = 13.90; 2028 96.4 and 14.90 - capital, valuation, payouts and trailing figures. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Morgan Stanley's Forms 10-K and 10-Q, earnings releases and financial supplements, the 2026 proxy statement and market data; operands shown in the source line.
Sources
Generated September 26, 2026