ZCZC
BCN-03
US-ECONOMY-BANKING
US Fed says large banks prepared to withstand economic crisis
WASHINGTON, June 22, 2019 (BSS/AFP) – Major banks operating in the United
States would be able to withstand a severe global economic crisis with funds
to spare, the Federal Reserve said Friday.
The Fed announced the results of its annual bank stress tests, showing the
18 largest financial institutions would suffer losses but still have enough
of a capital buffer to continue operating.
“The results confirm that our financial system remains resilient,” Fed
Vice Chairman Randal Quarles said.
During the 2008 financial crisis, the collapse of the mortgage securities
market essentially froze the financial system and the US government had to
spend billions to bail out banks.
Banking reform laws required the institutions to significantly increase
their capital and shore up their internal risk management to avoid another
government rescue.
“The nation’s largest banks are significantly stronger than before the
crisis and would be well-positioned to support the economy even after a
severe shock,” Quarles said in a statement.
The Fed subjects banks to a potential global crisis in which the US
economy contracts by eight percent and unemployment jumps to 10 percent.
Credit card loans showed the highest losses under the “severely adverse
scenario,” followed by commercial and industrial loans, at $73 billion and
$107 billion respectively, according to the report.
Those two categories amount to 44 percent of the total estimated losses of
more than $410 billion.
The institutions tested represent about 70 percent of the assets held by
all banks operating in the United States.
All the banks passed, including Deutsche Bank’s US subsidiary which failed
last year, and others that passed only conditionally.
BSS/AFP/HR/0935