Banks could face tougher stress tests next year

|By:, SA News Editor

The Fed intends to use its own estimates about the effect of a recession on bank balance sheets in its stress tests. Previously, the Fed has relied on data from the firms themselves.

The central bank could project that bank assets would grow during a slump, as has happened in the past three recessions, rather than fall, as the banks have predicted.

With such a finding, the Fed could require banks to hold more loss-absorbing capital or limit shareholder payouts. (Fed letter)

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