Big Banks to Survive $685,000,000,000 Financial Crash Despite Riskier Lenders' Balance Sheets: Federal Reserve
A year after three of the biggest bank failures in US history, the Federal Reserve said US banking giants have enough capital to survive a "highly stressed scenario".
In its annual stress test, the Fed said the nation's 31 largest banks survived a simulation that left lenders with about $685 billion in losses on credit cards, corporate loans and commercial real estate.
The two-year simulation tested a scenario in which the stock market fell 55%, commercial real estate prices fell 40%, and the unemployment rate reached 10%.
While all the banks on the list have enough capital to weather the financial fallout, the Fed says bank balance sheets have become riskier this year due to higher credit card balances, tighter lending margins and riskier corporate loan portfolios.
“While the severity of this year's stress test is similar to last year's, the test resulted in higher losses as bank balance sheets became slightly riskier and expenses higher.
The purpose of our test is to help ensure that banks have enough capital to absorb losses in an extreme stress scenario. This test shows that they do."
JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley took part in the deck.
Troubled regional bank New York Community Bancorp, which is currently the 33rd largest bank in the U.S., did not participate in the test.
