Fed's Stress Test has nothing on Big Banks

Finally, 34 firms have attained approval by the Federal Reserve for capital return plans. This is the first time that all the 'stress tested' banks passed the Fed's requirements. What does this mean?

Big U.S. banks won approval from the Federal Reserve on Wednesday to return money to shareholders, suggesting regulators believe they are healthy enough to stop stockpiling capital--and, in some cases, start giving it back to investors.

In reality, we don't really know exactly what this means for the future of financial institutions, however, we can start assuming that this marks a turning point from the pre-crisis days in terms of bank reliability. Many banks are looking to pay out more than they earn over the next year.

Still,

"I'm pleased that the [stress-test] process has motivated all of the largest banks to achieve healthy capital levels and most to substantially improve their capital planning processes," Fed governor Jerome Powell said in a statement Wednesday.

The largest firms, however, "continue to fall short of supervisory expectations" in a few areas, including maintaining accurate data and identifying risks in new products or underwriting standards, the Fed's report said.

Regardless, the banks' efforts seem to have paid off. They are better capitalized and managed than before the financial crisis.

What do you all think this really means? Are bank stocks going to rise? Do you think this level of Federal Reserve inquiry is good enough?

I'm also curious as to how that will affect us. Will this have any significant effect on people working at banks or will this be felt solely by the shareholders?

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Comments (25)

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Dec 31, 1969

Hi niki.c, don't worry, the WSO Monkey Bot is here.... I'm hoping one of these links will help find your answer:

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Dec 31, 1969

I don't think the us gov't is denying it if it is true. That's just not something you do. I think it is ridiculous that we have to assume they will be leaked, and that people like barney frank are able to use that threat as an argument to violate the trust banks put in the gov't and publicize results that are not supposed to be.

Dec 31, 1969

I'm sorry but I have to call bullshit on this. If this had any merit people would be rioting in the streets right now. Basically, what the report is saying, is that doomsday is coming tomorrow. Things are bad, prob very bad, but def not as bad as they made it sound.

Dec 31, 1969

I'm not sure what the hell you people are talking about. It's common knowledge in policy circles and academics that the "stress tests" are a farce. (When you have a crisis of confidence- which is what it initally amounts to- then the best action is to reassure investors and the public- hence makeup "stress tests" that banks "pass").

Come May 4 when the results are officially released we will "see" how strong our banks are. The results for these "stress tests" were decided before it ever started.

Dec 31, 1969

I'm sure Mr. Turner's blog is a great source. When not writing antisemitic and white supremacist blog posts he doubles as an authority on bank stress tests. His sources are sure to be airtight.

Dec 31, 1969
models_and_bottles:

I'm sure Mr. Turner's blog is a great source. When not writing antisemitic and white supremacist blog posts he doubles as an authority on bank stress tests. His sources are sure to be airtight.

It would be nice if the SEC got involved with this and locked this guy up. who am i kidding?

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Dec 31, 1969

I struggle to understand what the government seeks to achieve with them, other than placating John Q Public by pretending they are monitoring the big bad banks.

Dec 31, 1969
Dec 31, 1969

Roubini wants the government to slowly unwind derivative products - not for me

Dec 31, 1969

"Also who make up the top 31 US Banks. Any link as to where I can find them." typical fat dude, too lazy to determine the most basic list of the biggest banks on his own

Dec 31, 1969

lol ...bortz911 what about the first part of the question. When are stress tests expected to be released for the top 31 US banks. Are these dates secret and only available to fed officials.

Dec 31, 1969

So much for Citi being the surprise winner: http://www.reuters.com/article/2012/03/12/us-banks...

Dec 31, 1969
asiamoney:

So much for Citi being the surprise winner: http://www.reuters.com/article/2012/03/12/us-banks...

haha Exactly.

Dec 31, 1969
asiamoney:

So much for Citi being the surprise winner: http://www.reuters.com/article/2012/03/12/us-banks...

ha ha ha

Dec 31, 1969

Good article, thanks for the post.

"For what shall it profit a man, if he shall gain the whole world, and lose his own soul?"

Dec 31, 1969
Dec 31, 1969
EuroLocust:

Power of the internet...
http://dspace.cigilibrary.org/jspui/bitstream/1234...

good find

Dec 31, 1969
Dec 31, 1969

"The cheaper the crook, the gaudier the patter"