Coming soon for banks: Stress Test 2
The Federal Reserve wants the 19 companies whose finances were examined closely in 2009 to show how they'd survive another financial crunch.
The Federal Reserve will require all 19 financial companies that underwent stress tests during the height of the financial crisis to undergo another review of their capital and their ability to absorb losses under an "adverse" economic scenario.
The Fed said today that the financial companies must submit capital plans by early next year showing their ability to absorb losses under a set of conditions to be determined by the central bank.
Bank of America (BAC), JPMorgan Chase (JPM), Goldman Sachs (GS), Morgan Stanley (MS), Regions Financial (RF) and Metlife (MET).
The one privately held company in the list was Ally Financial, formerly known as GMAC. While the company is managed by Cerberus Capital, the Treasury owns 56.3% of the company. The company plans an initial public offering in 2011.
The request is part of the Fed's effort to step up supervision at the nation's largest financial firms.
The Fed also issued a roadmap for banks that want to raise dividends or buy back stock, with regulators saying firms must show they have adequate capital in place to absorb losses and show an ability to satisfy increased capital requirements.
Big banks, including Wells Fargo (WFC) and JPMorgan Chase, have been pushing strongly to be able to boost their dividends.
Regulators tested the resilience of 19 major bank-holding companies in 2009 and found that 10 of them required a total of $75 billion to reinforce their balance sheets.
The stress tests and subsequent capital raisings by some banks boosted investor confidence in financial stocks and helped the United States pull out of the 2007-08 financial crisis.
Stress tests are designed to determine what would happen to a bank's financial condition in the face of a traumatic event, such as a sharp drop in economic growth or a default by a major borrower.
The government's tests measured potential losses on mortgages, commercial loans, securities and other assets held by the stress-tested banks.
Nine of the tested banks -- JPMorgan and Goldman Sachs, as well as several regional institutions -- were found to have had adequate capital. That finding essentially represented a seal of approval from the Fed.
Here's how stocks of the 18 publicly held financial companies have performed since the 2009 market bottom.
|How stocks of the stress-tested banks have fared since 2009|
|Company||Today||Chg.||Chg. Since '09|
|PNC Financial Services||$55.80||0.34%||201.46%|
|Bank of New York Mellon||$27.67||-0.05%||53.58%|
|Capital One Financial||$38.64||-0.46%||364.98%|
|Fifth Third Bancorp||$12.54||-1.11%||872.02%|
|Bank of America||$11.67||-2.26%||271.66%|
|Data as of 3 p.m. ET on Nov. 17|
Say goodbye to GM, it will be bought sooner or later by China and our Government agrees with this. GM is no longer a growth stock.
The only American auto company will be Ford.
GM is the master of hype & lies! Even to believing their own fabrications! What is the difference now? No new serious product! The old product is sitting on the lots! So , they mover around some numbers to make the gullible temporally feel good! But it's still the same old GM with a Plastic face lift! I give it two weeks ! China will end up owning GM, and then you will see the real change action, and drive one! "So The General goes, goes America!" BP owns & runs our Government & now China will be running what was GM...I'm glad I like rice!
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