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15 largest banks passed Fed’s stress tests

March 14, 2012

Smartinmoney.com | The Federal Reserve said 15 of the 19 largest U.S. banks pass stress tests as they could maintain adequate capital levels even in a recession scenario in which they continue paying dividends and buy back stock. Four banks, including Citigroup, Suntrust Banks, Ally and Metlife, have more work to do and need more capital.

Under the stress scenario, unemployment rate of 13 percent, a 50 percent drop in stock prices and a 21 percent decline in prices would produce aggregate losses of $534 billion over nine quarters. Even with that blow, the 19 banks would see their tier one common capital ratio fall to 6.3 percent in the fourth quarter of 2013 in the hypothetical scenario, above the 5 percent minimum the Fed required. The ratio was 10.1 percent in the third quarter of last year.

The banks that passed the stress tests celebrated with announcements of increased dividends and plans to buy back their own shares

 

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