Stress tests

Big banks will need to show how well they can withstand three different scenarios before they can pay dividends; the German payments company is still looking for $2 billion of missing funds.

The senior official said the Federal Reserve’s gauge of a firm’s performance under economic recovery scenarios will affect decisions about its capital distribution, but individual results of the analysis will not be made public.

Unlike in previous years, the results from two different evaluations will be released simultaneously and will include an assessment of bank capital under coronavirus-related scenarios.

The takeaway from the PPP rollout is that bankers must protect their reputations and limit their risk appetites as they participate in further government-backed rescue programs.

The general structure of this year’s reviews is unchanged despite the pandemic. But a supplemental analysis of banks' response to the downturn could weigh heavily in evaluating 2020 capital distributions and making adjustments to the tests over the long run.

Payouts continue to be relatively generous, but that could change if the Federal Reserve demands banks bolster capital or the economy worsens.

The Federal Reserve also said in a supervisory report released Friday that it would conduct stress tests this quarter as planned, taking into account sudden deterioration in the economy brought on by the coronavirus pandemic.

The agency's top supervisory official said the Comprehensive Capital Analysis and Review will proceed on schedule, and signaled that the Fed will look at how institutions are responding to fallout from the coronavirus.

Q1 profits expected to drop by nearly 25%, while investment banking revenues could tank much more; many banks have tighter standards than the SBA.

OakNorth helps banks analyze credit, identify pandemic-related risks and forecast borrower issues before they turn into defaults.