"Wall Street banks must prove they are able to weather a serious global recession as part of an annual Federal Reserve exercise meant to ensure the biggest lenders won’t collapse in a new crisis."
I found this article extremely interesting as it explains how the Fed will be using a series of stress tests to challenge 18 firms on how sturdy they are given a significant blow in the economy. It speaks to dividend payments and the ability to buy back stock on an individual firm basis. This exercise implemented by the Fed is referred to as Comprehensive Capital Analysis and has been in place since 2008's financial crisis.
https://www.bloomberg.com/news/articles/2018-02-01/wall-street-faces-fed-stress-tests-that-assume-another-meltdown
2 comments:
This article is very interesting because it shows that the Fed is trying to be cautious and be ready in case the economy has a crisis. It would be interesting if they explained more how these tests are going to be and also, what is going to happen if the banks fail the test? What is the Fed going to do with the institutions that failed the test and how are they going to solve this?
I am happy to hear the Fed is requiring tests and extensive plans from banks. However, Felipe makes a good point that this article really doesn't mention what the Fed will do in case of the banks not passing. Hopefully, with more transparency and cautionary acts it will be enough for banks to realize if they need to change something before it is too late.
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