On Thursday, June 22, 2017, the Federal Reserve said all of the 34 largest USA banks are fortified enough to withstand a severe US and global recession and continue lending. Those banks represent about 75 percent of all US assets.
The assessments are created to gauge the potential impact of a severe downturn on bank operations and capital levels as part of the Dodd-Frank financial reform law. The Federal Reserve uses its own independent projections of losses and incomes for each firm.
The CCAR results could affect banks' buyback and dividend plans.
The second portion of the test, to be released on Wednesday, will show whether the Fed approves or denies banks' capital plans. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $134.5 billion at March 31, 2017. 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 tests compare the losses projected for each bank with its capital.
Citigroup performed the best with a tier 1 capital ratio of 9.7 per cent. Ally Financial and KeyCorp were both below seven per cent.
The Fed can reject a bank's capital plan for either reason. That measure, called the tier-one capital ratio, was exceeded by all 34 banks.
Katy Perry: Witness review - edgy, new-look Perry keeps melodic flair
The country-turned-pop superstar is offering her entire back catalog for streaming through all digital services. Especially when someone tries to assassinate my character with little girls [their respective fan groups].
However, lenders' aggregate levels of high-quality capital would still cover 9.2 per cent of their risk-weighted assets, which is significantly higher than the 4.5 per cent required by regulators and an improvement on last year's 8.4 per cent.
The largest USA banks collectively showed that they can withstand a severe economic downturn and continued to improve their capital positions, according to the results of Dodd-Frank Act-mandated stress tests the Federal Reserve released today.
The combined loan losses would be $383 billion.
The results portrayed a picture of increasing resilience in the banking sector, with the 34 participating firms having added US$750 billion in common equity capital since 2009.
"This year's results show that, even during a severe recession, our large banks would remain well capitalized", Federal Reserve Gov. Jerome Powell said in a statement.
That means even if a bank passed previous year, there's no guarantee it will do so again. The Fed has also seen the tactic as a way to poke around bank balance sheets for weak assets.