Federal Reserve hands out stress tests to major US banks to calculate immunity to financial crisis

Wednesday, November 23rd, 2011 4:52:57 by Usman Khalid

Federal Reserve laid out a stress test for major financial institutions in the US. There are currently 19 banks on FRS’ subject-list; among them major parties are Bank of American, JP Morgan Chase and Goldman Sachs Group.

The statement issued by the Fed ordered these financial goliaths to undertake a test to see if they are capable of continuing operations in distressed scenarios like the 2008 financial crisis and the current European meltdown.

Banks are bound to submit results of these tests to the Fed by January of every year. The deadline set for the submission of 2012 results is January 12. The results will help these banks to forecast their financial condition in a recession or a meltdown
at Wall Street, and Feds will be able to cast an assistance plan.

The top six banks will undergo a more extensive test which will include a hypothetical global market shock, like one Europe is facing currently. This hypothesis will gauge their potency to withstand a stock market ordeal, the one which the US experienced
in the second half of 2008.

A statement issued by chairman, Ben Bernanke says:

“The global market shock will be based on market price movements seen during the second half of 2008, a time of significant volatility, with adjustments made to incorporate potential sharp market price movements in European sovereign and financial sectors.”

The six major subjects are Bank of America, Citi Group, JP Morgan Chase, Goldman Sachs Group and Morgan Stanley and Wells Fargo.

Other banks included in the roster for examination are Ally Financial, American Express, Bank of New York Mellon, BB&T, Capital One Financial, Fifth Third Bancorp, Keycorp, MetLife, Morgan Stanley, PNC Financial Services, Regions Financial, State Street,
SunTrust Banks and U.S. Bancorp.

The Federal Reserve is taking very calculated steps detracting any poker gamble to avoid the inoculation of European crisis in the US. However, major financial institutions in European market have deep lore in the US-based banks.

Tags: Ally Financial, American Express, Bank of America, Bank of New York Mellon, BB amp T, Capital One Financial, Citi Group, european crisis, federal reserves, Fifth Third Bancorp, Goldman Sachs Group, JP Morgan Chase, Keycorp, MetLife, Morgan Stanley, Morgan Stanley and Wells Fargo, PNC Financial Services, Regions Financial, State Street, stress test, SunTrust Banks, U S Bancorp, US, us 2008 financial meltdown

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