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All US banks pass first phase of 'stress test' | All US banks pass first phase of 'stress test' |
(35 minutes later) | |
All 31 US banks have passed the first hurdle in the Federal Reserve's latest round of annual "stress tests" to see how they would cope in the next economic crisis. | All 31 US banks have passed the first hurdle in the Federal Reserve's latest round of annual "stress tests" to see how they would cope in the next economic crisis. |
The central bank said the banks had enough capital to keep lending during a severe global recession. | The central bank said the banks had enough capital to keep lending during a severe global recession. |
This was the first time since the tests began in 2009 that all banks had a capital level above the minimum amount. | This was the first time since the tests began in 2009 that all banks had a capital level above the minimum amount. |
But some Wall Street giants were among the worst performers. | But some Wall Street giants were among the worst performers. |
Goldman Sachs, Morgan Stanley and JP Morgan Chase were among the five banks with the lowest readings for a capital ratio of at least 5%. | Goldman Sachs, Morgan Stanley and JP Morgan Chase were among the five banks with the lowest readings for a capital ratio of at least 5%. |
The ratio compares capital - a bank's ability to withstand losses - with the loans it has issued, which are weighted for their relative risks. | The ratio compares capital - a bank's ability to withstand losses - with the loans it has issued, which are weighted for their relative risks. |
In the next round of tests, the Fed will determine whether the banks can maintain those capital levels and still return money to shareholders. | |
On Wednesday, the central bank will approve or reject requests for increases to shareholder payouts such as dividends. | On Wednesday, the central bank will approve or reject requests for increases to shareholder payouts such as dividends. |
The tests were designed to restore confidence in the US financial system after the government had to provide a $700bn (£459bn) bailout package to stabilize hundreds of banks during the global financial crisis in 2008. | The tests were designed to restore confidence in the US financial system after the government had to provide a $700bn (£459bn) bailout package to stabilize hundreds of banks during the global financial crisis in 2008. |
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