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US Fed: Major US banks would withstand recession

US Fed: Major US banks would withstand recession

The Federal Reserve said Thursday that all of the 34 largest US banks are fortified enough to withstand a severe USA and global recession and continue lending.

Although the banks, including household names like JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N), would suffer $383 billion in loan losses in the Fed's most severe scenario, their level of high-quality capital would be substantially higher than the threshold that regulators demand, and an improvement over last year's level.

The testimony by the regulators at the five agencies comes less than two weeks after the Trump administration unveiled a 150-page report on how regulators and Congress could address regulations that they claim crimp banks' ability to lend and stifle economic growth.

Banks are still subject to a second portion of the test in which the Fed approves or denies their capital plans. The Fed said the losses would reduce the banks' high-quality capital from 12.5 percent of its loans in the fourth quarter previous year to 9.2 percent at the end of 2017.

Top policymakers stressed proposed changes to the Dodd-Frank law should not undermine the strength of reforms born from the 2008 recession and aimed at preventing another financial crisis.

Even Federal Deposit Insurance Corporation Chairman Martin Gruenberg, the sole holdover from Trump's Democratic predecessor, Barack Obama, said he was open to some small revisions.

Trump's new Cuba policy restricts tourism, military business
Imposing new restrictions on trade and travel to Cuba is something that a majority of Cuban-Americans would frown upon. And Americans can still self-certify under a general license that they are traveling to Cuba for legitimate reasons.

It's the third consecutive year there have been no banks failing. Those banks represent about 75 percent of all USA assets. Capital is the cushion a bank holds against losses. The Fed will release those results Wednesday. BB&T said it had a minimum tier 1 common ratio of 10.2 percent in the fourth quarter of 2016 and a 12 percent tier 1 risk-based capital ratio.

The Federal Reserve tested to see how banks with $50bn (£39.4bn) or more would respond in the event of a global recession, if unemployment increased to 10% and property values declined.

The participating banks represent more than 75 per cent of the assets of all domestic bank holding companies, according to the Fed.

The Fed said that the banks would collectively lose almost half a trillion dollars in its most extreme scenario but they would still be able to lend money.

BB&T projected having $5.4 billion in net revenue during the period and a loan-loss provision of $7.9 billion. Increasing dividends costs money and the government doesn't want banks to shrink their capital reserves, making them vulnerable in another recession. It was the third straight year that the Fed rejected the plan of the USA division of Santander, which is one of Europe's biggest banks, and the second straight rejection for Deutsche Bank Trust Corp., the US transaction bank and wealth management business of Germany's largest bank.

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