The NURFS Risk Barometer attempts to assess changes in risk among the largest banks in the U.S. Banks have been building capital cushions to absorb losses and improving the quality of portfolios, thus reducing the likelihood of losses. Since 2009-Q3, there is a significant increase in both CET1 capital ratios and significant reductions in non-performing loans and charge-offs.

Most of the metrics in the NURFS Risk Barometer have continued to improve or essentially remained unchanged over the last year. However, the metrics related to risk weights have declined and this is most likely due to a change in the regulator-set definition for calculating assets included in various risk weight categories starting in 2015-Q1. While this change negatively affects the measure of assets with zero risk weights, it has similar effects on risk-based capital ratios by increasing the risk-weighted asset component of the ratio. As a result, comparisons of metrics using risk-weighting between the periods before and after this definitional change, like those in this barometer, have limitations.

Each yellow “diamond” in the Barometer indicates a percentage change in the specific indicator between 2009-Q3 and 2015-Q2. The blue diamond represents what the NURFS Risk Barometer would have shown one year ago. The bars around the diamonds indicate statistical uncertainty at a 95% confidence level.

• Significant increase in high-quality capital (CET1) relative to risk-weighted assets and total assets
• Increase in Tier 1 capital 

• Large increase in fraction of zero risk-weighted, high quality assets
• Considerable reduction in non-performing loans and charge-offs

CORRECTION: In the Q2 2015 edition, the Risk Barometer contained incorrect data. The correct estimates for the percent changes between 2009-Q3 and 2014-Q4 of BHCs with assets greater than $10 billion are as follows: CET1/RWA, 37%; CET1/total assets, 36%; Tier 1 capital/RWA, 11%; Tier 1 capital/total assets, 9%; Total capital/RWA, 4%; Total capital/total assets, 2%; Assets with zero risk weights, 42%; Non-performing loans, -45%; Charge-offs, -84%.