Major US banks would withstand recession: US Fed

Major US banks would withstand recession: US Fed

The nation's biggest banks have "strong" levels of capital and would be able to keep lending even during a severe recession, the Federal Reserve said Thursday.

The results of the stress tests showed that these banks' tier one capital ratio, an important indicator for banks' capital levels, will drop to a minimum level of 9.2 percent in the most severe scenario, well above the minimum requirement set by regulators.

The results signal that many banks.

Trump has promised to undo various restrictions on financial firms that were put into place after the 2008 financial crisis, including the 2010 Dodd-Frank Act. The Fed compiles its own projections of losses and incomes for each bank.

America's big banks are a step closer to paying billions of dollars to shareholders after the Federal Reserve determined that their cash reserves were large enough to withstand a severe shock to the United States economy.

Banks coming closest to not meeting the minimum capital ratio were Ally Financial, with a tested level of 6.5 percent; Capital One Financial, with 7.0 percent; Huntington Bancshares, 7.0 percent; KeyCorp, 6.8 percent; and SunTrust Banks, 7.1 percent.

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The results portrayed a picture of increasing resilience in the banking sector, with the 34 participating firms having added US$750 billion in common equity capital since 2009. Bank of America's calculation was US$12.1 billion less than the Fed's US$45 billion.

In next week's second phase of the annual stress tests, the capital strengths of the individual banks will be weighed against their capital plans - whether they would remain adequately strong after planned dividend distributions and share buybacks.

Thursday's results are the first of a two-part exam.

The report said some stress tests should be conducted every two years instead of annually and that they should be limited to the largest banks.

Some analysts have questioned whether the Fed might flag Wells Fargo in the latter exam this year after regulators found its employees may have opened more than 2 million accounts without customers' approval. The Fed says it was the first time that the tests showed credit card lending as the biggest loss category.

The biggest U.S. banks' own estimates for loan losses were more optimistic than the Fed's - a trend that has arisen in past years as well. "They just can't get any money because the banks just won't let them borrow it because of the rules and regulations in Dodd-Frank". Bank of America's was 0.7 of a point worse.

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