Federal Reserve Plans Tougher Big-Bank Stress Tests This Year
February 01 2018 - 4:29PM
Dow Jones News
By Ryan Tracy
WASHINGTON -- The Federal Reserve said Thursday that its stress
tests for big banks will imagine a more severe economic downturn in
2018 than in last year's version, as it announced the details of
the hypothetical scenario banks must survive to pass the exams.
The Fed's latest "severely adverse" scenario imagines
unemployment at 10%, severe stress in corporate and real-estate
lending markets, and severely difficult economic conditions in
developing Asian countries and Japan, the central bank said.
Big banks must show the Fed they can survive the hypothetical
scenario with enough capital to continue lending. If they fail,
they face restrictions on payouts to shareholders. Test submissions
are due in April and will be announced by the end of June, the Fed
said.
Several firms are taking the full version of test for the first
time, the Fed said, including CIT Group Inc. and the U.S. units of
Barclays PLC, Credit Suisse AG and UBS Group AG.
The Fed said the 2018 scenario "features a more severe downturn
in the U.S. economy as compared to last year's scenario,"
reflecting the central bank's policy to include "elements that
create a more severe test of the resilience of large firms when
current economic conditions are especially strong."
Write to Ryan Tracy at ryan.tracy@wsj.com
(END) Dow Jones Newswires
February 01, 2018 16:14 ET (21:14 GMT)
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