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Banks are going to have to work harder next year if they want to continue to pass the Federal Reserve Board's annual stress test exercise.
March 19 -
In its second round of stress tests in two weeks, the Fed rejected two banks' capital plans — Ally and BB&T — while it found weaknesses in two others, JPMorgan Chase and Goldman Sachs.
March 14
WASHINGTON The Federal Reserve Board said Monday that the largest U.S. bank holding companies will submit results of their company-run, midyear stress tests to regulators this summer.
For the first time, 18 firms, including JPMorgan Chase & Co., Bank of America Corp., and Wells Fargo & Co., will release partial results of their midyear stress tests on July 5.
Under the Dodd-Frank Act, large banks are required to develop their own internal stress test exercise with baseline, adverse and severely adverse scenarios that reflect their "individual operations and risks," according to a press release from the Fed. The firms are required to publicly release results related the "severely adverse scenario," which they must do between Sept. 15 and Sept. 30.
"The midyear test marks another important step in the Federal Reserve's work in ensuring that large financial firms have robust capital planning processes and adequate capital so they can continue to lend to households and businesses even during adverse economic and financial circumstances," the Fed said.
The central bank said supervisors will incorporate the midyear stress tests into their ongoing review of the firms, but will not measure the results against any capital regulatory requirements.
Earlier this year, banks were subject to two rounds of stress testing an annual stress test exercise known as the comprehensive capital analysis review and Dodd-Frank mandated stress tests designed by regulators.
Under its CCAR exercise, the Fed approved the capital plans of 16 of the 18 largest banks, but rejected proposals put forward by Ally Financial and BB&T. The Fed also asked JPMorgan Chase and Goldman Sachs to take a second look at their capital plans citing weaknesses, but gave them conditional approvals to move forward.
