Federal Reserve Vice Chairman for Supervision Michael Barr testifies on recent bank failures at a U.S. Senate Banking, House and Urban Affairs Committee hearing on Capitol Hill in Washington, DC, May 18, 2023.
Saul Loeb | AFP | Getty Images
All 23 U.S. banks included in Fed annual report pressure test Riding through deep recession while continuing to lend to consumers and businesses, regulator says explain Wednesday.
The Fed said in a report that despite the group’s projected losses of $541 billion, banks will still be able to maintain minimum capital levels while continuing to provide credit to the economy in a hypothetical recession. release.
After the 2008 financial crisis (caused in part by irresponsible banks) ended, the Federal Reserve’s annual stress test determined how much capital the industry could return to shareholders through buybacks and dividends. In this year’s exam, the bank experienced a “severe global recession”, with unemployment soaring to 10 per cent, commercial property values falling 40 per cent and house prices down 38 per cent.
Banks have been the focus of intense scrutiny in the weeks since three mid-sized lenders collapsed earlier this year.But smaller banks have avoided the Fed’s test altogether, which scrutinizes large lenders, including JPMorgan and FuGuo bankan international bank with a substantial presence in the United States, and the largest regional bank, including national committee and truthist.
So clearing the stress test hurdle is not the “all right” sign that it was in previous years. Regulation of regional banks is expected to intensify in the coming months as a result of the recent collapses, and tightening international standards could raise capital requirements for the country’s largest lenders.
“Today’s results confirm that the banking system remains strong and resilient,” Michael Barr, the Fed’s vice chair for supervision, said in a news release. “In the meantime, this stress test is just one way to measure that strength. We should How risks arise remain humble and continue to work to ensure that banks can withstand a range of economic scenarios, market shocks and other stresses.”
The bank is expected to reveal its latest buyback and dividend plans after regular trading closes on Friday. Given the uncertainty over upcoming regulations and the risk of an actual recession next year, analysts say banks are likely to be relatively conservative with their capital plans.
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