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Federal Reserve Plans Tougher Big-Bank Stress Tests This Year - ABI

The Federal Reserve said yesterday that its stress tests for big banks will imagine a more severe economic downturn in 2018 than in last year’s version, as it announced the details of the hypothetical scenario banks must survive to pass the exams, the Wall Street Journal reported. The Fed’s latest “severely adverse” scenario imagines unemployment at 10 percent, severe stress in corporate and real-estate lending markets, and severely difficult economic conditions in developing Asian countries and Japan, the central bank said. Big banks must show the Fed they can survive the hypothetical scenario with enough capital to continue lending. If they fail, they face restrictions on payouts to shareholders. Test submissions are due in April and will be announced by the end of June, the Fed said.

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