Tags: Fed | Big | US | Banks | Pass | Stress | Tests

Fed: Big US Banks Should Be Able to Pass Stress Tests

Monday, 27 Jun 2011 01:33 PM

 

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Most large U.S. banks that weathered the financial crisis by strengthening the level and quality of their capital should be able to pass future stress tests, said a researcher at the Federal Reserve Bank of San Francisco.

Banks have managed over the past two years to improve their capital ratios, regardless of whether they participated in the stress tests of 2009, Fred Furlong, a group vice president in the San Francisco Fed’s economic research department, said in a paper released today, without identifying the banks. Bank of America Corp. and Citigroup Inc. are among those that took steps to bolster their capital positions in 2009.

“The capital positions of large banking organizations should be strong enough to allow most of them to pass stress tests more routinely,” given their recent improvements in capital and other changes, Furlong wrote.

Global central bank governors agreed this weekend on extra capital rules for banks whose size or systemic importance means their failure could cause another financial crisis. Regulators agreed that as many as 30 of the world’s largest lenders should face surcharges that range from 1 percentage point to as much as 2.5 percentage points of core capital to prevent them from causing another financial crisis.

Capital rules, known as Basel III, are scheduled to be phased in from 2013 through 2019. The Bank for International Settlements is the parent organization of both the Basel Committee on Banking Supervision and the Group of Governors and Heads of Supervision, which oversees the committee’s work.

© Copyright 2014 Bloomberg News. All rights reserved.

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