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Certain large banks emerged as stalwarts among their competitors following severe tests by the Federal Reserve Board. Others, such as Citigroup Inc. and Ally Financial, fared less well.
March 13 -
The Fed's results found Ally Financial Inc. in the weakest position in a hypothetical scenario in which the economy experienced a nosedive. Citigroup Inc. and SunTrust Banks Inc. would just barely fall short of capital minimums in such an event.
March 13 -
The Federal Reserve Board is scheduled to release results this week of the toughest stress tests to date. They will determine what firms can pay a dividend and shape public perceptions of banks' health.
March 9
WASHINGTON — Citigroup Inc., the third largest U.S. financial institution, said Wednesday that it did not fail the Federal Reserve Board's latest stress test.
"It is important to make clear that Citi did not 'fail' the stress test," Edward Skyler, an executive vice president for the company said in a statement.
Pointing to the Fed's results, which were released after markets closed on Tuesday, the company said it had ample capital to withstand severe adverse economic conditions, including 13% unemployment, posed under the Fed's test.
Citi said the company's minimum capital ratio was 5.9% — above the 5% threshold set by the Fed. But it was only able to surpass that minimum without issuing dividends or making share repurchases to its shareholders. If it did return capital to shareholders, the company held a weaker capital ratio of 4.9%, just below the minimum.
The Fed did allow the bank to continue its existing dividends on its preferred stock and its common stock and didn't object to the company redeeming certain series of outstanding trust preferred securities. The Fed did block Citi from its proposed return of capital to shareholders.
Still, Citi said it plans to follow-up with the Fed on its decision.
"We plan to engage further with the Federal Reserve to understand their new stress loss models," said Skyler.
The company also called on the Fed to release its models and the related benchmarks and assumptions. Prior to the release of the results, a number of institutions raised concerns about potential changes the Fed could make to its assumptions that could potentially alter results.
Such adjustments would be a bigger concern for those banks, like Citi, who were on the cusp of meeting requirements.
"We believe greater transparency in this process will best serve all banking institutions and their shareholders as well as the international regulatory community and market participants, and will encourage a level playing field globally," added Skyler.
