American lenders just sailed through their last stress-free stress tests. The Federal Reserve on Thursday said that the banks it oversees have enough capital to ride out a 'severely adverse' scenario involving $612 billion of losses. That effectively opens the door to generous payouts for shareholders. But the arrival of new Fed supervisory chief Michael Barr may bring a more critical tone in the future.
to withstand bad happenings including a hypothetical surge in the unemployment rate to 10%.
Barr, who is set to replace Quarles if confirmed by the Senate, has said the damage caused under Trump needs to beThere's a good chance that means resurrecting the ability to fail firms for shaky risk controls even if their capital is abundant, among other moves the lenders themselves will claim are overly subjective. From now on, expect the tests to once again be testing.
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