A major " sress test " was relatively successful for the big
American banks , will it be enough though says the blogger ?
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So, America's largest banks appear to have the financial strength to
survive a nightmarish world , where unemployment soars , house prices plummet ,
and WallStreet crashes , said
the FED .....
The FED requires big banks to undergo stress tests each year that aim to
assess whether the institutions would be able to withstand the sort of economic
and financial storm that ripped the country more than six years ago .
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The method is simple : Put the tests add up the losses that a bank
would suffer on its loans and trades during an hypothetical storm . The Fed then
assesses the degree to which those losses would deplete a bank's capital , the
financial foundation of every bank .
As a result , some of the 31 banks in this year's test would emerge from
the theoretical shocks with significantly less capital than others .
Under the tests , Goldman Sachs fell very close to a minimum requirement
for one measure of capital .
Bank of America was well above all the minimum requirements
appearing among the clear winners of the test .
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The Fed projected that the 31 banks would suffer losses of
$490 billion during a period of just over two years , under its
MOST SEVERE assumptions .
Those include a deep recession in which the unemployment rate
reaches 10% . In addition , the stockmarket falls by more than a half and
house prices lose a fourth of their value.....
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BLOGGER'S COMMENT : Well , apparently supervisors in the US
seem to have taken their lesson , remains to see if markets
under a fear or panic hypotheticallly status..would react
according to the Fed's assumptions...
And not to forget : What will happen with the banks' plans to distribute
capital to shareholders through dividends
and buybacks ?
What followed the " crash " of Lehman Brothers era ,
IS NOT SO FAR AWAY.......
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