Four out of 19 largest U.S. banks have not passed Stress tests that were arranged by the U.S. Federal Reserve. The list includes a giant financial institution – Gitigroup. At the same time the Fed which operates as the Central Bank of the United States reported that the financial health of all 19 financial institutions is now better than it was in 2008 when the global economic crisis erupted.
The Fed has been conducting bank stress tests during the last three years, but now has announced the test results publicly for the first time. To the banking experts’ surprise Citigroup that ended last two financial years with a profit was among those banks that could not pass stress tests. Along with this bank a list of failed banks include such banks as SunTrust, Ally Financial and MetLife.
By the results of this audit the Federal Reserve may require the failed banks to take steps to improve their financial conditions. In particular, they may be temporarily prohibited from repurchasing their shares and raising share interest rates. As a last resort, a forced sale of a part of their shares can be considered. By resorting to such measures in 2009, the Fed made 10 banks to attract an additional $ 75 billion, out of which $ 34 billion came on Bank of America.
This year, the conditions of the stress tests were much stricter than before. In this case scenario the stability of banks was tested in a situation when the U.S. unemployment rate increased from the current 8.3 to 13 percent, a stock market quotes dropped by half while prices on property fell by 21 percent. Firstly, The Fed wants to be sure that after the tightening of international banking rules that is due in the 2013, U.S. financial institutions will remain stable, and secondly, it wants to be prepared in the event of further deterioration of world economic conditions. Anyway the failed banks must take actions for improving their current financial conditions.
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