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Fed Stress Test: Banks Could Lose Nearly $200 Billion

March 8th, 2013
in econ_news, syndication

Econintersect:  One of the biggest surprises to come out of the latest stress test of U.S. banks by the Federal reserve:  Goldman Sachs (NYSE:GS) is one of the fedseal2weakest financially of the nation's largest banks.  This potentially will impact the bank's ability to pay or increase its dividend.  It could also curtail the extent of any share buyback program.  Whether legally required or not the result could limit the ability to pay employee bonuses, as well.  The stressed Tier 1 common ratio for GS was 5.8.  Only Morgan Stanley among the large all Street banks was lower (5.7).  The minimum required is just below the this pair, at 5.0%.

Also weak were JP Morgan Chase (NYSE:JPM) at 6.3 and Bank of America (NYSE:BAC) at 6.8.  Ally Financial (formerly GMAC) was in a dismal class of its own with a ratio of 1.5.  The average for all 18 systemically important banks was 7.7.

Follow up:

Two tables from the stress test report:

Click on tables for larger images.

stresstest2013tier1ratios

stresstest2013netlosses

The stress test parameters are summarized in the following graphs:

stresstest2013gdp

stresstest2013unemployment

stresstest2013stockmarket

stresstest2013houseprices

Source:

Dodd-Frank Act Stress Test 2013 (Federal Reserve Bank, March 2013)










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