The Federal Reserve has agreed to ease Morgan Stanley's capital requirements

The Federal Reserve said on Tuesday that the stress capital buffer requirement for Morgan Stanley (MS. N) has been reduced to 4.3% from the original 5.1%. The adjustment comes after the Wall Street firm asked the Fed in August to reconsider the results of its annual stress testing evaluation. The multi-stage test is designed to assess the ability of large US banks to withstand stress in a hypothetical recession. "Based on an analysis of the information submitted by Morgan Stanley, the board determined that the estimated losses on the bank's fair value option loan portfolio were too conservative," the Fed said in a statement. All 22 banks, including Morgan Stanley, passed the Fed's stress testing this year, proving that they can withstand losses of more than $550 billion.