Stress tests

Europe’s landmark test of banks’ resilience to global warming was far softer than many lenders had expected, according to people familiar with the matter.

This year’s stress-test results show large banks have more than enough capital to deal with a major economic crisis, but their capital requirements will likely go up anyway. That has some observers and industry officials concerned credit will tighten even as the economy teeters on the edge of recession.

Despite a more rigorous hypothetical stress scenario than last year, each of the 33 banks examined retained far more than their minimum capital requirements in this year’s stress-test results.

U.S. banking giants are poised to return $80 billion to shareholders after this year’s Federal Reserve stress tests, less than last year’s elevated level that followed a pandemic-driven buyback pause.

The Federal Reserve's models assume interest rates will decline if the economy falls into a recession, but as big banks prepare for their annual stress tests, they should also be considering the impact of rising rates and higher inflation on their operations.

The largest U.S. banks will be tested against a hypothetical massive surge in unemployment and a crash in commercial real estate in the Federal Reserve's annual stress tests, according to scenarios announced Thursday.

The European Central Bank is stepping up pressure on lenders to prepare for stress tests next year that will show just how vulnerable the industry is to climate change, according to people familiar with the process.

This year’s stress tests examined 23 banks including JPMorgan Chase and Goldman Sachs, with the remainder of the firms on an “every other year” test cycle. The capital requirements for those remaining firms are unchanged from last year.

Sixty-one percent of executives at large U.S. banks said their institution would be prepared to comply with the kind of testing now happening in the U.K., according to a new survey. But experts question whether bankers are underestimating the data-gathering challenges ahead.

Nine of the 12 largest banking companies in the U.S. proposed higher quarterly payouts to shareholders. In announcing the actions, the banks touted their strength after more than a year of economic dislocation.

Some of the 23 large banks that participated in last week’s stress tests will be better positioned to reward shareholders than others, since they padded their capital amid the pandemic. Still, all are expected to tread cautiously amid ongoing economic uncertainty.

Four companies — Regions Financial, MUFG Americas Holdings and the U.S. arms of the Royal Bank of Canada, BMO Financial— felt they had something to prove to the Federal Reserve after being assigned higher capital buffers than most of their peers last year. Will their decisions pay off for shareholders?

The Federal Reserve found that under its harshest stress-test scenario, bank capital ratios would decline to 10.6% on average — well above the 4.5% minimum requirement. Restrictions imposed on dividend payments and share repurchases during the economic crisis last year will be lifted after June 30.

The biggest U.S. banks, led by JPMorgan Chase and Bank of America, are expected to pay out $142 billion in capital to shareholders after clearing this year’s stress tests.

Nineteen of the nation's largest banks plus four smaller firms will be tested against baseline and severely adverse economic scenarios. The central bank will release details on their performance on June 24.

The White House directive may lead regulators to develop new mortgage underwriting standards, stress-test requirements and flood insurance policy, observers said.

Regulators around the world are exploring how to assess banks' exposures to climate change risks. But they'll have to tackle legal, economic and modeling problems that don’t have obvious solutions.

For banks that pass this year’s stress tests, the Federal Reserve said it will eliminate the restrictions on dividends and share buybacks while subjecting those institutions instead to the stress capital buffer.

A former Federal Reserve employee admitted to illegally taking documents, including bank stress test data, after deciding to leave the board, U.S. prosecutors said Friday.

Comerica, Regions and KeyCorp executives say their companies will proceed with caution despite the green light from the Federal Reserve to buy back stock in case they have to cover a surge in loan growth as the economy recovers.