The Federal Reserve is scheduled to release results of annual stress tests for big banks in two parts, one today, and the other on Thursday, June 27. The firms could have an easier time with the exams because the Fed for this year overhauled several components, including a test of how firms would fare under a hypothetical doomsday scenario, the Wall Street Journal reported. Each year, banks subject their balance sheets to doomsday scenarios envisioned by the Fed. This year, the central bank’s “severely adverse” scenario would see unemployment rising by more than 6 percentage points to 10 percent, with U.S. stocks declining by 50 percent and major stresses in the corporate lending and real-estate markets. After the Fed publishes the scenarios, banks run their own tests, which helps them determine how much capital they can return to shareholders while still remaining sufficiently capitalized under the hypothetical crisis. Eighteen banks, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. will take the stress tests this year, compared with 35 last year. The Fed allowed firms with assets generally between $100 billion and $250 billion to skip this year’s tests under a new biennial schedule for those firms.
