Major US banks would withstand recession - Fed

Seeking to provide some regulatory relief to community banks and other small financial institutions bank regulators are asking Congress to consider several changes to the 2010 Dodd Frank financial reform laws. Full credit Megan Pendergrass  CNNMoney

Seeking to provide some regulatory relief to community banks and other small financial institutions bank regulators are asking Congress to consider several changes to the 2010 Dodd Frank financial reform laws. Full credit Megan Pendergrass CNNMoney

America's 34 largest banks have all passed the first stage of the Federal Reserve's annual stress tests, meaning they would have enough capital to meet regulatory requirements during a severe economic crisis.

It was the third consecutive year for the largest USA banks to meet the requirements by the Fed in the stress tests.

Dodd-Frank stress tests force analyze whether banks could survive hypothetical scenarios created to gauge a major firm's financial stability. The first phase aims to ensure that each participating bank is sufficiently capitalized to withstand a severely adverse economic scenario, and the US banking sector as a whole has strengthened considerably over recent years thanks to focused efforts by the banks as well as due to an improved operating environment. And by subjecting banks to the same model, the regulator might push them into businesses that turn out to be perilous, she said.

The most severe hypothetical scenario projects $383 billion in loan losses at the 34 participating bank holding companies during the nine quarters tested.

The table below summarizes the main domestic variables considered by the Federal Reserve for the stress test.

In next week's second phase of the annual stress tests, the capital strengths of the individual banks will be weighed against their capital plans - whether they would remain adequately strong after planned dividend distributions and share buybacks.

The market will be watching one key metric closely - how many banks will return more than 100 percent of earnings. He said the Fed supports increasing the $50 billion asset threshold set in the 2010 law so that the rule would only apply to the largest banks.

CWS: Fitch drives in four in Louisville win
Howard, who normally keeps to himself in the dugout on days he's pitching, said he went nuts when he saw the ball leave the yard. Brian Howard (12-3) earned the win for TCU. "And Big Game Howie, as he's affectionately known in Fort Worth, showed up today ".

USA unemployment would rise to 10%, accompanied by a 35% drop in commercial property prices and pressures on corporate loan markets as well. It was the first time the tests showed losses from credit card loans rising to an equal level with losses from commercial and industrial loans, the Fed said.

Last year, the Fed stress test model of what a severe recession would look like cut bank capital ratios by 3.9 percentage points. The regulatory minimums are 4.5 percent for Tier 1 common ratio and 6 percent for Tier 1 risk-based capital ratio.

The financial industry, and mid-size banks in particular, have complained of the burden the new regulations place on lenders.

Trump may soon nominate a Fed vice chairman for banking supervision, who will oversee the tests. The CCAR results could affect banks' buyback and dividend plans.

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

The firms reviewed included Bank of America, JP Morgan Chase and Wells Fargo.

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