Biggest US banks pass Federal Reserve stress tests

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All American banks have passed the annual federal reserve tests about whether they can carry an economic and future economic crisis, prompting analysts to predict a severe increase in stock profits and the re -purchase of shares.

The Federal Reserve said on Friday that under a “severe” negative scenario, when unemployment increased to 10 percent, 22 banks, including JPMorgan Chase, Goldman Sachs and Bank of America, will lose more than $ 550 billion.

However, they suffer from a much smaller strike of capital than it was in recent years and remains well within the required regulatory standards.

The theoretical recession used by the Federal Reserve to test the flexibility of banks was less severe than the previous year. While the scenario is designed before president Donald Trump returns to his post, he comes at a time when he is pushing his administration to reduce financial regulations.

“The large banks are still of great luxury and flexibility in a set of severe results,” said Michel Bowman, Vice -President of the Federal Reserve for Supervision.

The results of the “stress tests” of the Federal Reserve will be used to calculate the minimum capital that banks need in relation to their amended risk assets, providing a decisive insulation to absorb losses.

Jason Goldberg, a Barclays analyst, expects, on the basis of the results of this year, Goldman Sachs will be the largest winner among the main American lenders because the minimum capital will decrease from 13.7 percent to 10.7 percent. He expected that Wales Vargo, M&T Bank and Morgan Stanley would have the capital requirements by 1 percentage.

He added that this is likely to raise the amount of excessive capital, which most banks seek to return to shareholders through stock profits and the re -purchase of shares. “We expect to purchase the participation of (dollars) by 12 percent in [the] “The average bank for the previous year exam, with most banks settling up,” he said.

Banks are optimistic that the tests will become more absorbed after the Federal Reserve responded to the legal challenge by the main bank lobby group with a promise to repair the exercise. The central bank said earlier this year it is planning to make the exercise more transparent and average test results over the past two years to reduce volatility.

The banks are required to wait until Tuesday to submit an update on what they expect to be new capital requirements. Often they make plans for stock profits and sharing re -purchases after federal strain tests.

The Federal Reserve said that this year’s stress tests will push the total capital rate for banks, its main pillow against losses, a decrease of 1.8 percentage points- a smaller decrease than it was in recent years and much less than a decrease in 2.8 points in the exercise last year.

But the Federal Reserve said that it is expected that the capital requirements for banks will be calculated on the basis of an average proposal for two years, provided that it is completed in the coming weeks. This will increase the number of capital to 2.3 percent. Bowman said the change was preferred to “address excessive fluctuation in the results of the stress test and the corresponding capital requirements.”

The lender bearing the largest decrease in its capital due to the theoretical stress was the American Bank of Deutsche, which had a virtual decrease of more than 12 degrees Celsius, based on the average results in the past two tests. The largest waterfalls in US subsidiary companies were in UBS in Switzerland and RBC in Canada. But they all remained more than twice the level of 4.5 percent through the exam.

In the “severe passive” scenario for this year, the US GDP decreased by 7.8 percent a year, unemployment increased 5.9 percent to 10 percent and inflation slowed to 1.3 percent. Home prices decreased by 33 percent and commercial real estate prices decreased by 30 percent.

Although this will be one of the most extreme stagnation in history, it is more moderate than the one that the Federal Reserve has placed last year. The collapse of the theoretical market-where the stock prices decreased by 50 percent and on the high-yielding bonds-was less severe than it was in the exercise last year.

The Federal Reserve said banks have benefited from their high profit. He added that it included less virtual losses than private shares after “adjusting how these exposters measured to be better in line with the characteristics of this exposure.”

Under the pressure from Trump to reduce the regulatory burden to support growth and investment, the Federal Reserve announced plans to reformulate many banks ’bases.

This week, the Federal Reserve and two other major banking centers announced plans to reduce the improved supplementary leverage, which determines the amount of capital that the largest banks need against their total assets.