Fed examines 32 US banks that have more than $100 billion in assets

The Federal Reserve American will publish this Wednesday, when the markets close, the annual results of the stress tests it has carried out on a total of 32 banksthose with more than US$100 billion in assets.

The figure is higher than last year since, due to a regulation by the US regulator, banks with between 100,000 and 250,000 million dollars in assets have to pass the tests every two years.

The Federal Reserve uses these stress tests to determine the capital reserves that entities have to make in the face of possible crises, a tool designed to protect the banking system against shocks.

Additionally, the Federal Reserve’s annual stress tests are important to bank shareholders because they often impact dividends and share buybacks.

Thus, according to the FEDstress tests ensure that large banks are sufficiently capitalized and able to lend to households and businesses even in a severe recession.

They assess banks’ financial resilience by estimating losses, revenues, expenses and resulting capital levels under hypothetical economic conditions.

Large institutions such as Bank of America, JPMorgan Chase, Barclays US LLC or Wells Fargo & Company, among others, as well as smaller banks such as Huntington Bancshares, Keycorp or Regions Financial Corporation.

According to analysts, this year’s results are not expected to change significantly from last year, when the 23 largest US banks passed the tests despite banking uncertainty that wiped out Silicon Valley Bank (SVB) and Signature Bank in March 2023.

According to the Fed’s analysis, banks remained “above capital requirements” during a hypothetical global recession, despite losing more than US$500,000 million (458,227 million euros at today’s exchange rate) in the projections.

Even so, experts point out, it is not clear that passing the tests this year will mean an increase in dividends since the sector is immersed in regulatory reform.

own Federal Reserve is studying applying new, stricter capital rules to banks with more than 100,000 million in assets, to reinforce security after the bankruptcies of entities such as the Silicon Valley Bankhe Signature Bank and the First Republic Bank.

This new regulatory framework would seek to tighten what was agreed by the Basel Committee on Banking Supervision after the 2007-2009 financial crisis.

The proposed changes would mainly affect medium-sized banks with assets between $100 billion and $250 billion.