Fed's Big 'Stress Test' Reveal Ahead

Receiving Wide Coverage ...

The Federal Reserve has a way of injecting "stress" back into the term "stress tests" — at least for Bank of American and Citigroup, which have both stumbled during the examinations in recent years.

An analysis by the Wall Street Journal finds that the two banks could have returned as much as $24 billion more to shareholders if the level of dividends and share buybacks they offered had matched those of competitor Wells Fargo. The shortfall is explained in part by lackluster performance during the annual tests, which helps determine a bank's capital outlay.

"The $24 billion difference underscores how the stress tests have expanded from a wonky exercise into one of the most powerful instruments regulators can wield," according to the Journal.

Meanwhile, in a nod to what's been happening across the pond, several banks included calculations in their tests addressing the fallout if Britain decides to leave the Europe Union.

A public vote on the "Brexit" question is scheduled for Thursday, the same day that regulators are slated to release the first round of results for this year's tests, which examine how 33 large banks fare against hypothetical market shocks. Next week, the Fed will notify banks as to whether it's approved their capital-return plans for the year.

The timing of the two events this week is expected to keep bankers busy.

"It is going to be all hands on deck," Barclays bank analyst Jason Goldberg told Reuters.

Apparently, he postponed his 11-year-old son's birthday dinner to focus on Thursday night's results.

Wall Street Journal

Bitcoin rivalry: Chatter about whether Ethereum "can ever be more than a niche project for developers" continues in the wake of a major attack on the Decentralized Autonomous Organization last Friday.

Swaps safety: The Commodity Futures Trading Commission has proposed a change that would allow clearinghouses to open accounts at the Federal Reserve Bank of Chicago, rather than at commercial banks, to house customer margin funds and collateral. It's taking comments through July 5.

Yellen to the Hill: Fed Chair Janet Yellen will testify at the Senate Banking Committee on Tuesday morning, where she's likely to field questions on bank regulation in addition to being grilled on the state of the economy. The congressional marathon continues tomorrow when she appears before the House Financial Services Committee.

New York Times

Tough slog: Running a megabank is not a popularity contest. But that's still got to be cold comfort for Credit Suisse's CEO Tidjane Thiam, who's struggled to win over the rank and file — not to mention the markets — since joining the firm last summer.