The nation’s 33 biggest banks have enough capital to withstand a severe economic contraction.
Federal Reserve Chairman Jerome Powell speaks to the Senate Banking, Housing and Urban Affairs Committee, as he presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington. – The nation’s 33 biggest banks have enough capital to withstand a severe economic contraction, the Federal Reserve said Thursday.
Even in with those variables, the 33 largest banks would still, on average, have a capital ratio 9.7%, well above the 4.5% required by law, the Fed said. Capital ratios are an industry measure of how strong a cushion a bank holds against unexpected losses. The Fed’s test is an academic exercise, and this examination is not predicting a recession, even though financial markets have increasingly priced in the possibility of a recession later this year as the nation’s. This test was designed before Russia invaded Ukraine and before the current period of high inflation.
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