U.S. Banks Stress Test

Global Business

The Federal Reserve’s annual test shows that some of the most prominent U-S banks are strong enough to withstand another potential financial crisis. However, not all U.S. banks passed with flying colors. CCTV’s Shraysi Tandon reports.
The Federal Reserve delivered a blow to banking giant Citigroup, after rejecting the bank’s plans to raise dividend payments and increase stock buybacks. In its annual “stress test,” Citigroup was one of five banks that failed the Fed’s review. This year, Citigroup, HSBC North America, RBS Citizens Financial Group, Santander Holdings U-S-A and Zions didn’t have enough capital in reserve to convince Fed regulators that they could survive a severe economic crisis like the one in 2008-without a government bailout.

U.S Banks Stress Test

U.S Banks Stress Test

The Federal Reserve's annual test shows that some of the most prominent U-S banks are strong enough to withstand another potential financial crisis. However, not all U.S. banks passed with flying colors. CCTV's Shraysi Tandon reports.

Citigroup was the only one of the top five U.S. banks to fail the Fed’s tests. Citigroup received the largest government bailout in 2008-$45 billion in cash and billions more in loan guarantees. This is Citi’s second stress test failure in the past three years.

Overall, the Fed reports that 29 out of the 30 largest financial institutions in the U-S have enough capital to withstand severe disruptions, including big swings in global financial markets, a severe drop in housing prices and a steep increase in unemployment. Some investment bankers say the Fed’s recent rejection of the Citigroup plan is actually good news.

In this years’ test, the Fed expanded the number of banks it reviews from 18 to 30 and included the American units of some large European banks. The Fed has been making its annual stress test tougher, which may have some bankers grumbling, but banking sector analysts argue that it has boosted confidence in the American financial system.