How Banks Fared On The Fed’s Stress Test

Bank trading results

The Federal Reserve unveiled the results of its stress test Wednesday—an exercise more commonly known as the Comprehensive Capital Analysis and Review, and the annual gauge of the financial health of the nation’s biggest banks.

By most measures, the results were positive ones, as noted by CNBC, with three concerns or objections raised out of 33 organizations tested.

Of those, the Fed said that it objected to the capital distribution plans that Deutsche Bank Trust and Santander US had proposed.  This objection stymies the companies from issuing dividend or commence with share buyback plans until new proposals are floated, the Fed said – and this marks the second year in a row the two firms have been singled out.

In another call-out, the same regulators are looking for Morgan Stanley to push its own new capital plan by the end of this year, according to CNBC.

As has been widely reported, the stress tests were set in motion in the wake of the financial crisis.  The goal has been to discover the resiliency of the banks to weather global economic and financial shocks.

The two parts of the stress test can be broken down to embrace capital buffers (as had been announced last week, with all 33 institutions passing those hurdles).  The most recent segment of the stress test had centered on risk and capital allocation during system-wide stress.