In the first part of its annual tests, the Fed said 34 of the largest US banks have significantly bolstered their defenses since the 2008 crisis.
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 U.S. economy.
Although the banks, including household names like JPMorgan Chase & Co and Bank of America Corp, would suffer $383 billion in loan losses in the Fed's most severe scenario, their level of high-quality capital would be substantially higher than the threshold that regulators demand, and an improvement over last year's level. The Fed says it was the first time that the tests showed credit card lending as the biggest loss category.
"This year's results show that, even during a severe recession, our large banks would remain well capitalized", said Fed Governor Jerome Powell. The banks undergoing the seventh annual check-up included JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo and Co., which are the four biggest USA banks by assets. 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. The Fed said the losses would reduce the banks' high-quality capital from 12.5 percent of its loans in the fourth quarter past year to 9.2 percent at the end of 2017.
"Today's results reaffirm that USA banks are strong and remain well positioned to continue playing their important role in accelerating economic growth", said ABA President and CEO Rob Nichols. Passing the stress test does not necessarily mean a lender will pass the CCAR as the PhDs at the Fed can approve or flunk a bank based on qualitative as well as quantitative grounds.
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McConnell will need to win the votes of 50 of the 52 GOP senators to push the bill through the Senate. The aide spoke on condition of anonymity because he was not authorized to openly discuss the plans.
The results of the CCAR - in which banks' buyback and dividend plans are evaluated - are set for release after the market close on Wednesday. "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".
The tests have become less dramatic in recent years with fewer quantitative failures.
That means even if a bank passed a year ago, there's no guarantee it will do so again. Bank of America's was 0.7 of a point worse.
FILE - In this Thursday, Oct. 13, 2016, file photo, commuters walk by a Wells Fargo ATM location at New York's Penn Station.