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The largest US banks have all passed the annual tests of the Federal Reserve, whether they can withstand a future economic and market crisis and open the door for them to increase dividends and share returns.
The FED said on Friday that the 22 under its “serious” scenario, in which unemployment increases to 10 percent BanksIncluding JPMorgan Chase, Goldman Sachs and Bank of America, would lose more than $ 500 billion.
However, they would suffer a much smaller lust for capital than in recent years and remain good according to the necessary regulatory standards.
The theoretical recession, which the FED used to check the banks, was less serious than in the previous year, and underlined how the supervisory authorities have passed a more bank -friendly approach since winning the presidential election of last year.
“Large banks are still well capitalized and resistant to a number of serious results,” said Michelle Bowman, the deputy chairwoman of the Fed for supervision.
The results of the Fed of the Fed “Stress tests”Is used to calculate the minimum capital that banks need in relation to their risk -controlled assets, and provide a critical buffer to absorb losses.
Banks are optimistic that the tests will become even more accommodating after the FED has reacted to a legal challenge of the main banks lobby group with the promise to revise the exercise. At the beginning of this year, the central bank said the exercise more transparent and the test results over the past two years average to reduce volatility.
The banks have to wait until Tuesday to get an update about what they expect for their new capital requirements. They often issue plans for dividends and share buyback according to the FED stress tests.
The FED said that this year’s stress tests would pursue the total capital ratio of the banks, their main pad against losses, by 1.8 percentage points- a lower decline than in recent years and far below the decline of 2.8 percentage points in the last year’s loss.
However, the FED said that it would calculate the bank’s investment requirements on the basis of its two -year average proposal, provided this has been completed in the coming weeks. This will increase capital to 2.3 percent. Bowman said the change was preferable to “commit the excessive volatility of the tension test results and the corresponding capital requirements”.
The lender with the greatest decline in his capital due to the theoretical stress was the US operation of Deutsche Bank, which had a hypothetical decline of more than 12 percent based on the averaged results of the last two tests. The next largest falls were among the US subsidiaries of UBS and the Canadas RBC in Switzerland.
In this year’s “severe” scenario this year, the US BIP decreased by 7.8 percent in one year, unemployment rose by 5.9 percentage points to 10 percent and inflation slowed down to 1.3 percent. Real estate prices went by 33 percent and commercial real estate prices decreased by 30 percent.
This would be one of the most extreme recessions in history, but it is milder than that that was created by the Fed last year. The theoretical market crash with stock prices by 50 percent and high-ranking bonds, which is also very seriously sold than in the practice of last year.
The Fed said banks benefited from their higher profitability. It added that it had included lower hypothetical losses from private equity after “adapting the measurement of these exposure to better match with the characteristics of these exposure”.
Under pressure from Trump to facilitate the official burden on growth and investment, the Fed has announced plans to revise many of its rules for banks.
This week, the FED and the other two main banks announced plans to reduce the improved additional lever quota, which requires capital to need the largest banks against their total assets.
