All US banks pass Dodd-Frank stress tests

Posted June 23, 2017

All of the 34 largest US banks are fortified enough to withstand a severe USA and global recession and continue lending, the Federal Reserve said Thursday.

Fed Governor Powell said recently that regulators will share more information with the industry during next year's exams after bankers complained the process was too opaque.

"The nation's largest bank holding companies have strong capital levels and retain their ability to lend to households and businesses during a severe recession", said the Fed in a statement on Thursday.

Revising the Fed's annual stress tests is one of more than 100 recommendations the Treasury Department has suggested to lessen the burden on banks, including limiting the number of financial firms that must face the exams.

USA unemployment would rise to 10 per cent, accompanied by a 35 per cent drop in commercial real estate prices and pressures on corporate loan markets as well.

The bank said it would have a minimum Tier 1 common ratio of 7.9 percent and a minimum Tier 1 risk-based capital ratio of 9.6 percent.

Today's results were the first under President Donald Trump, who aims to relax capital regulations and encourage banks to lend more.

In last year's second round, the Fed barred USA businesses of two European banks, Germany's Deutsche Bank and Spain's Santander, from raising dividends or boosting stock buybacks.

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 USA economy.

The results of the central bank's so-called stress tests showed 34 major lenders were on solid capital footing, it said. Its model produced a 9.8 percent minimum CET1 ratio, 1.4 points better than the Fed's.

Next week, banks will learn whether the Fed is blocking or approving its plans to buy back stock or pay dividends to shareholders.

The 34 bank holding companies tested, which are generally those with $50bn or more in total consolidated assets, represent more than 75 per cent of the assets of all domestic bank holding companies.

Other banks serving the Triad required to conduct the stress test are Bank of America Corp., Fifth Third Bancorp, PNC Financial Services Group Inc., SunTrust Banks Inc. and Wells Fargo & Co. "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". This year a spotlight was turned on commercial real estate came after some regulators feared the sector was overheating on easy credit from the banks.