Federal Reserve adds more banks to stress-test
(25 November 2011 — United States) The United States’ Federal Reserve will test 31 US banks in 2012 to measure how they would deal with a severe economic shock, as part of Wall Street reforms aimed at preventing a fresh financial crisis.
The announcement adds 12 new banks to the Federal Reserve’s stress-testing regimen after examining 19 in 2011. It said any bank or bank holding company with assets worth over US$50 billion (A$52 billion) would be subjected to tests.
'The level of detail and analysis expected in each institution's capital plan will vary based on the company's size, complexity, risk profile, and scope of operations,' the Federal Reserve said.
Under the rules, the central bank and regulator could veto bigger dividend payments or stock buy-backs if firms are judged strong enough to withstand a crisis.
The six largest firms 'will be required to estimate potential losses stemming from a hypothetical global market shock,' much like that seen in late 2008, the Fed said.
Banks will be asked to present their plans by 9 January 2012 and some of the results will be published.
'The level of detail and analysis expected in each institution's capital plan will vary based on the company's size, complexity, risk profile, and scope of operations,' the Federal Reserve said.
Under the rules, the central bank and regulator could veto bigger dividend payments or stock buy-backs if firms are judged strong enough to withstand a crisis.
The six largest firms 'will be required to estimate potential losses stemming from a hypothetical global market shock,' much like that seen in late 2008, the Fed said.
Banks will be asked to present their plans by 9 January 2012 and some of the results will be published.
Subscribe