Fed to Discharge first round of stress test results for big banks

Yellen: U.S. banks are lending along with globally competitive

The nation’s biggest banks are set to get the results of their annual financial health checkup.

On Thursday, the Federal Reserve will Discharge the results of round one of its “stress tests,” which determine whether banks are financially strong enough to weather a severe recession.

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The more closely watched day by investors will come next Wednesday, when the Fed tells banks whether they showed not bad enough judgment of which year to buy back stock or pay dividends to shareholders.

Regulators are sizing up 34 institutions, including Bank of America (BAC), JPMorgan Chase (JPM), along with Citigroup (C). CIT Group (CIT) will be a newcomer to the exercise.

Banks will be assessed on slightly tougher economic conditions than within the past. The exam imagines a grim scenario — a 10% unemployment rate, a sharp decline in housing prices along having a severe recession within the eurozone.

Related: Trump gives banks (a lot of) what they want

Regulators are looking For 2 key pieces of information. One will be whether the banks have enough capital to survive economic turmoil within the financial system. along with two, whether firms are not bad at identifying along with measuring risk when they craft their plans.

Regulators can reject a bank’s capital plan for either reason.

of which will be the seventh year in a row the Fed has run stress tests, which were put in place after the financial crisis.

Related: Mnuchin: Housing finance reform a ‘priority’ for Trump White House

Each year, regulators tweak the exam to keep banks on their toes. Regulators also want to test each bank’s ability to guard against potential financial shocks.

of which means even if a bank passed last year, there’s no guarantee of which will do so again.

HSBC North American Holdings along with RBS Citizens Financial Group, for example, passed in 2013, yet were rejected the following year.

Banks will get the chance to revise their capital plans before next week’s results are released. yet any bank of which fails will have to draw up fresh plans along with won’t be allowed to pay dividends to shareholders until of which has been approved by regulators.

Wall Street executives describe stress tests as a black box, purposely left opaque to keep banks coming from gaming the exercise. Regulators contend they have continued to provide additional guidance to financial institutions to better set expectations.

Related: Trump signs orders of which take aim at Dodd-Frank

President Trump has vowed to scrap many regulations on banks, particularly those of which he says have suppressed lending. Trump has promised to undo various restrictions on financial firms of which were put into place after the 2008 financial crisis, including the 2010 Dodd-Frank Act.

“I have so many people, friends of mine, of which had nice businesses,” Trump said in February. “They can’t borrow money. They just can’t get any money because the banks just won’t let them borrow of which because of the rules along with regulations in Dodd-Frank.”

Revising the Fed’s annual stress tests will be one of more than 100 recommendations the administration has suggested to lessen the burden on banks, including limiting the number of financial firms of which must face the exams.

Even though some bankers say they would likely be lending more without the Dodd-Frank rules, lending has grown. Data suggests of which has been a lack of demand, not supply, of which will be tamping down borrowing by U.S. companies.

“Lending has expanded overall by the banking system, along with also to tiny businesses,” Federal Reserve Chair Janet Yellen said in February. Compared with their global competitors, American banks are “generally considered quite strong. They’ve built up quite a bit of capital, partly as a result of our insistence of which they do so,” she added.

CNNMoney (Washington) First published June 22, 2017: 12:01 AM ET


Source : Fed to Discharge first round of stress test results for big banks

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