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The Fed assures that the United States banking is prepared to withstand a serious recession

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The finances of the big banks USA they are healthy enough to face a severe recession scenario, assured the Federal Reserve (FED).

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The US Central Bank published a report with the results of its annual banking stress tests, according to which the 34 largest financial institutions in the country could face a severe economic downturn.

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The possibility that the US economy will enter a recession is increasing, especially after the FED began to decree aggressive interest rate hikes to fight high inflation, a measure that can be effective in lowering prices. , but which can also lead to a slowdown in economic activity.

“Banks continue to have high levels of capital, which would allow them to continue lending money to households and businesses during a severe recession,” the report mentions.

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The Fed explained that the 34 banks evaluated remained above the minimum capital requirementsdespite total hypothetical losses of $612 billion in the event of a severe recession.

In this scenario, the aggregate ratio of capital and common shares, which provides an extra cushion against possible losses, would drop by 2.7 percentage points to a minimum of 9.7%, a percentage that would continue to be more than double the minimum required, he pointed out. the FED.

The hypothetical scenario designed by the central bank this year was more severe than 2021, and included a global recession with substantial impacts on housing and corporate debt markets.

In this context, unemployment would rise by 5.75 percentage points in the United States, to a total of 10%; and the Gross Domestic Product (GDP) would drop considerably.

Source: Larepublica

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