Fed: Biggest US banks strong enough to withstand recession

Fed: Biggest US banks strong enough to withstand recession

The banks were tested to determine if they have large enough capital buffers to keep lending, even if hit with billions of dollars in losses brought on by a financial crisis and severe economic downturn. The banks undergoing the seventh annual check-up included JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo and Co. - the four biggest US banks by assets.

Rob Nichols, president and chief executive officer of the American Bankers Association, said the Fed should consider a number of recommendations recently laid out by the Treasury Department, including making the stress tests more transparent and less frequent.

The Fed introduced stress tests after the 2008 financial crisis rocked markets around the globe in order to examine whether the country's biggest banks could handle a severe recession.

"This would allow them to lend throughout the economic cycle and support households and businesses when times are tough", he said.

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In reality, Amazon informally looked at acquiring Whole Foods past year , according to people familiar with the matter. The company opened its first physical food store in Seattle a year ago , as well as a host of Amazon Books stores .

Since 2009, the 34 firms have added more than $750bn in common equity capital, the Federal Reserve said.

"This year's results show that, even during a severe recession, our large banks would remain well capitalised", governor Jerome H. Powell said.

Almost nine years on, banking industry profits have been steadily rising and banks have been lending more freely. Thanks to their larger store of capital, banks are able to shoulder financial losses, like heightened stress in the corporate loan markets or commercial real estate. That measure, called the tier-one capital ratio, was exceeded by all 34 banks. Bank of America's calculation was US$12.1 billion less than the Fed's US$45 billion.

All 34 lenders subjected to the Fed stress tests exceeded the minimum projected capital and leverage ratios under the severely adverse scenario.

Record 65 million people displaced in 2016
Another 40 million people were displaced within the borders of their own countries, about 500,000 fewer than in 2015. This equates to one person becoming displaced every 3 seconds - less than the time it takes to read this sentence.

The second phase is an annual Fed exercise that evaluates the banks' capital planning processes and capital adequacy.

The firms reviewed included Bank of America, JP Morgan Chase and Wells Fargo.

A Fed official said Thursday that the results show the industry is well-capitalized and credited the reforms with boosting lending for banks. They then ask what that would do to a bank's balance sheet.

"If the Fed bets wrong and treats one particular trading strategy as low risk and it's high risk, all the banks will have taken that low-risk bet and it will have turned out very badly", she said.

Tropical storm could form by next week
These showers and thunderstorms are developing off a broad area of low pressure near the Yucatan Peninsula in the Southern Gulf. In addition to the Gulf storm, tropical development is possible near the equator over the central Atlantic early this week.

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