29 of 30 big banks pass Fed’s stress test

March 20, 2014
Banking
All big banks but one pass Fed stress test

Big U.S. banks have enough capital buffers to withstand a drastic economic downturn, the Federal Reserve said Thursday, announcing that 29 out of 30 major banks met the minimum hurdle in the Fed’s annual health check.

All of the big banks except ­Zions Bancorp stayed above the 5 percent requirement for top-tier capital in the latest round of stress tests.

The tests aim to show how banks would weather a financial collapse similar to the 2007-09 crisis. Banks had to show how they would cope with a halving of the stock market, and the eight largest banks had to weigh the impact of the default of their biggest trading counterparty.

Stress tests are closely watched by financial markets as a sign of the industry’s health, and also because the Fed can reject a bank’s plans to return capital to shareholders if it thinks the bank is not strong enough.

The Fed will announce on March 26 which banks’ plans to pay dividends or buy back shares were approved.

Zions, based in Salt Lake City, was the only bank to miss the minimum, with a tier 1 capital ratio of 3.5 percent in the most severe stress scenario. A spokesman for Zions was not immediately available for comment.

The other 29 banks stayed above the minimum levels. But M&T Bank came in relatively low, at 5.9 percent, and Bank of America’s tier 1 ratio was 6 percent.

Bank of New York Mellon, Discover Financial Services and State Street had the highest capital ratios. Discover announced shortly after the release of the results that it planned to increase its quarterly dividend.

— Reuters

AUTOMOTIVE
GM CEO Barra to testify on recall

Mary Barra, chief exeuctive of General Motors, is scheduled to testify April 1 to a House panel investigating the company’s long-running problem with defective ignition switches that have been linked to 12 deaths, the committee said late Thursday.

House Energy and Commerce Committee leaders also said they had invited David Friedman, acting head of the National Highway Traffic Safety Administration, to testify at the hearing.

This will be the first in what could be a series of hearings by the House panel, which began an investigation after GM’s decision to recall 1.6 million of its vehicles because of the ignition problem that first surfaced more than a decade ago.

While the ignition defect began long before Barra and Friedman assumed their current positions, their testimony “will be essential to getting answers about what went wrong,” committee Chairman Fred Upton (R-Mich.) said.

The hearing will be conducted by the panel’s oversight and investigations subcommittee.

— Reuters

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