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America's banks are really, really healthy

23 June 2017

Even after being pounded by a severe economic downturn, banks collectively had a 9.2% capital buffer, staying well above the Fed's minimum of 4.5%. The banks undergoing the seventh annual check-up included JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo and Co. - the four biggest USA banks by assets. Analysts had expected U.S. banks to make a strong showing in this year's test.

Trump has promised to undo various restrictions on financial firms that were put into place after the 2008 financial crisis, including the 2010 Dodd-Frank Act.

"The nation's largest bank holding companies have strong capital levels and retain their ability to lend to households and businesses during a severe recession", said the Fed in a statement on Thursday.

In last year's second round, the Fed barred USA businesses of two European banks, Germany's Deutsche Bank and Spain's Santander, from raising dividends or boosting stock buybacks.

The fear is that our banks are so interconnected now that even a small crisis could bring down the financial system.

Under the Fed's worst-case stress test scenario, the US unemployment rate more than doubles to 10 percent.

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BB&T projected having $5.4 billion in net revenue during the period and a loan-loss provision of $7.9 billion.

Regulators can reject a bank's capital plan for either reason.

The combined loan losses would be $383 billion.

Since 2009, the almost three dozen firms have added more than $750 billion in capital to their coffers.

The firms' aggregate common equity tier 1 capital ratio, which compares high-quality capital to risk-weighted assets, would fall from an actual 12.5 percent in the fourth quarter of 2016 to a minimum level of 9.2 percent in the hypothetical stress scenario. That measure, called the tier-one capital ratio, was exceeded by all 34 banks. The Fed has also seen the tactic as a way to poke around bank balance sheets for weak assets. The day we get to learn which banks have all their ducks in a row and which will have to supplicate before the feet of the Great Yellen in order to regain their seat at the big boy table.

They are: Ally Financial, American Express, BancWest, Bank of America, Bank of New York Mellon, BB&T, BBVA Compass, BMO Financial, Capital One, Citigroup, Citizens Financial, Comerica, Deutsche Bank, Discover, Fifth Third, Goldman Sachs, HSBC, Huntington Bancshares, JPMorgan, KeyCorp, M&T, Morgan Stanley, MUFG Americas Holdings, Northern Trust, PNC, Regions Financial, Santander Holdings, State Street, SunTrust, TD Group, U.S. Bancorp, Wells Fargo and Zions Bancorp. Bank of America's was 0.7 of a point worse.

America's banks are really, really healthy