Amid rising fears that central bankers could lose control and send the global economy into a recession, we got some positive news today.
Today we learned that the thirty-three largest banks in the country passed the Federal Reserve’s annual stress test. 👍
The annual stress test scenario included a 40% decline in commercial real estate prices, a 55% drop in stock prices, higher stress in the corporate debt market, and a 10% unemployment rate. 😱
The results and passing grades endorse the strength of the U.S. banking system. 💪
Stricter capital requirements and other Dodd-Frank financial regulations have forced banks to clean up their balance sheets and manage risk more responsibly, leaving them better prepared for major downturns like the ones simulated in the Fed’s test.
Skeptics may point to the silliness of trusting the Fed’s assessment given how behind the curve they’ve been, but we’ll take what we can get these days. 🙃
Bank stocks are more or less unchanged on the news, given this result was largely expected by analysts.
Instead, investors are waiting for Monday, when banks can publicly confirm their stress-capital buffer and will also reveal their shareholder return plans. 💰