- Posted August 21, 2013
- Tweet This | Share on Facebook
Fed says big banks must improve financial cushions
By Martin Crutsinger
AP Economics Writer
WASHINGTON (AP) -- The Federal Reserve says the nation's largest banks need to do a better job of determining how much capital they need to cushion against a future crisis.
In a report issued Monday, the Fed said the big banks have made progress in preparing for stresses like those brought by the 2008 financial crisis. But it said they must go further by accounting for specific risks that relate to their business activities.
The Fed has been conducting annual stress tests on the biggest banks since 2009. The next round will include the 18 largest banks and an additional 12 firms that will participate for the first time next year.
The report came as President Barack Obama met Monday with banking regulators for a status report as the five-year anniversary of the financial crisis approaches.
The Fed's stress tests serve as an annual check-up on the big banks. Under the tests, banks must assume severe weakness in the economy and financial market turmoil and then calculate the losses they'd incur under those conditions. The banks compare those projected losses with the capital they're holding to determine whether they're adequately prepared for a severe downturn.
As a result of the tests, the Fed tells the banks whether they can raise their dividend -- the quarterly payout that banks give shareholders. Many retirees living on fixed incomes rely on dividends for a portion of their income.
The tests also govern whether the Fed lets banks buy back more of their own stock, which can help increase the stock price.
Published: Wed, Aug 21, 2013
headlines Oakland County
- Associations gather for Spring Fling
- Law school’s team wins William and Mary Colonial Cup Competition
- Supreme Court makes it easier to sue for job discrimination over forced transfers
- Oakland County Physician bound over on insurance fraud charges
- Innocence Project leaders present at University of Pennsylvania Carey Law School Spring Symposium
headlines National
- Incarceration series includes female inmates but doesn’t tell full story
- ACLU and BigLaw firm use ‘Orange is the New Black’ in hashtag effort to promote NY jail reform
- Former DOJ official who alleged election fraud violated at least one ethics rule, ethics committee says
- Winston & Strawn will provide reduced-cost legal services for routine tasks under Winston Legal Solutions umbrella
- Should Justice Sotomayor retire? Chemerinsky, White House haven’t joined calls for her to step down
- Which BigLaw firms are increasing lateral associate hiring the most? One made legal headlines last year