Fed says 29 of 30 Top U.S. Banks Could Survive a Severe Recession

Vehicles are reflected in a window at JPMorgan Chase & Co. offices in New York. (Peter Foley, Bloomberg)
Vehicles are reflected in a window at JPMorgan Chase & Co. offices in New York. (Peter Foley, Bloomberg)

Only one of the nation’s 30 largest banks would not be able to withstand a severe recession and the firms collectively are in better financial position to handle economic shocks than five years ago, according to Federal Reserve stress test results released Thursday.

Under the most extreme of three economic scenarios, Zions Bancorporation of Salt Lake City would be the only large bank at risk of failure because a key measure of financial strength would fall below the Fed’s standard.

The Fed conducts two rounds of stress tests and next week will give what amounts to pass/fail grades for the banks after factoring in each firm’s plans for dividend payments or stock buybacks this year.

PHOTOS: Federal Reserve chairs through the years

“The annual stress test is one of the Federal Reserve’s most important tools to gauge the resiliency of the financial sector and to help ensure that the largest firms have strong capital positions,” said Fed. Gov. Daniel K. Tarullo, who oversees the central bank’s regulatory functions.

“Each year we are making substantial improvements, which have helped make the process even stronger than when we first conducted the stress tests in the midst of the financial crisis five years ago,” he said.

The banks have a combined $13.5 trillion in assets, nearly 80% of the U.S. industry.

Under the Fed’s severely adverse economic scenario, those 30 firms would lose about $501 billion over 27 months.

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SOURCE: Jim Puzzanghera 
The Los Angeles Times

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