Global Associates: Majority of US banks pass Fed’s Stress Test


Posted July 19, 2016 by globalassociates

Global Associates: “Nearly all of the US’ major banks are stable enough to increase payouts to shareholders with only two failing”.

 
Now the stress tests have been completed, results show that US banks have not only amassed significant capital since the financial crisis but that management teams have proven the ability to resolve their disaster planning to the Fed. However, the Fed criticised some elements of Morgan Stanley’s capital planning but still allowed the bank to continue with its plans for a $3.5 billion stock repurchase programme and a quarterly dividend while it remedies its situation.
Timothy Faraday, Chief Economist at Global Associates said, “The two banks that failed the test were Deutsche Bank Trust Corporation and Santander Holdings USA. Broad and significant weaknesses still continue in their capital planning processeses. The rebuff of their capital plans—the third consecutive year in a row for Santander and the second for Deutsche—means that they are restricted from returning profits home.”
Deutsche Bank holds its transaction and wealth management businesses in the United States. The bank will soon be consolidating its US business into a new holding company called DB USA Corp, a larger unit, which will have its capital plan reviewed by the Fed in 2018. Despite these failures, both banks have improved and, on a quantitative basis, all 33 banks that took part in the stress tests effortlessly passed the Fed’s capital requirements.
Global Associates Banks have been accumulating capital since the crisis, which has more than doubled, having added more than $700 billion in equity capital since the beginning of 2009. While the Fed’s stress evaluations are subjective, the process forced banks into being far better prepared. Its safeguards on the quality of risk management and capital planning have steered improvements in governance, infrastructure and controls.

About Global Associates
Global Associates' advisory investment management service is appropriate for private investors wishing to preserve control over the ultimate investment decision process. Typically, these individuals will have the time and/or a degree of financial market sophistication that makes the retention of such control feasible. We undertake to keep them informed of economic trends, current market conditions, movements in particular stocks, commodities and the latest research.
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Last Updated July 19, 2016