U.S. banks have enough capital to withstand a severe economic downturn, the Federal Reserve said on Thursday, with all but one major bank passing the annual health check of the financial sector, Reuters reported yesterday. A stronger economy and banks’ efforts to boost their capital since the 2007-09 U.S. financial crisis helped all 18 participating lenders except Ally Financial meet the minimum hurdle of a 5 percent capital buffer in the Fed's “stress test.” The tests give regulators a view into how the banking sector would respond to a severe recession. The firms in the test represent more than 70 percent of total bank holding company assets in the U.S. Of the four largest U.S. banks, Bank of America, Wells Fargo and Citigroup saw improvements in their minimum tier 1 common capital ratios, compared to last year’s similar test, while JPMorgan Chase was steady at 6.3 percent. Citigroup had the highest ratio of the top four at 8.3 percent. Two Wall Street banks, Morgan Stanley at 5.7 percent and Goldman Sachs at 5.8 percent, showed the two lowest outcomes above the 5 percent threshold. Stress testing has become a central part of U.S. regulators' efforts to shore up the financial sector after the crisis. The 2010 Dodd-Frank financial oversight law called for the tests to ensure that banks have big enough capital cushions to survive a severe recession or other economic jolt.
