Biggest US banks clear first hurdle in Fed's annual stress tests

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CIT was added this year to the banks tested by the Fed.

The Fed has changed the emphasis in stress scenarios from year-to-year to keep banks from managing their portfolios to the test.

They are: Ally Financial, American Express, BancWest, Bank of America, Bank of New York Mellon, BB&T, BBVA Compass, BMO Financial, Capital One, Citigroup, Citizens Financial, Comerica, Deutsche Bank, Discover, Fifth Third, Goldman Sachs, HSBC, Huntington Bancshares, JPMorgan, KeyCorp, M&T, Morgan Stanley, MUFG Americas Holdings, Northern Trust, PNC, Regions Financial, Santander Holdings, State Street, SunTrust, TD Group, U.S. Bancorp, Wells Fargo and Zions Bancorp.

The Fed introduced stress tests after the 2008 financial crisis rocked markets around the globe in order to examine whether the country's biggest banks could handle a severe recession. The Federal Reserve uses its own independent projections of losses and incomes for each firm.


"This year's results show that, even during a severe recession, our large banks would remain well capitalized", said Fed Governor Jerome Powell. This was the first year that all the country's big banks passed since the recession.

The Comprehensive Capital Analysis and Review (CCAR) is an annual exercise to evaluate the capital planning process and capital adequacy of large banks. That phase is closely watched by shareholders because it dictates whether lenders can increase dividends and buy back stock.

Almost nine years on, banking industry profits have been steadily rising and banks have been lending more freely. The Federal Reserve plans to publicly release the results of CCAR on Wednesday, June 28, 2017. 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. Specifically, the tests will feature a sample portfolio to show how certain assets would be affected by the Fed's invented crisis, he said.

Mr Trump may soon nominate a Fed vice chairman for banking supervision, who will oversee the tests. Strong numbers show banks have learned how to position their portfolios to pass tests, and not necessarily lend as much as possible, said Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc. The Fed has also seen the tactic as a way to poke around bank balance sheets for weak assets. Bank of America's was 0.7 of a point worse.

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