WALL STREET JOURNAL: The Federal Reserve’s annual test of big banks’ financial health showed the largest U.S. firms are strong enough to withstand a severe economic downturn, a sign that many will get the green light soon to reward investors by raising dividends and buying back shares.
The Fed said 29 of the 30 largest institutions have enough capital to continue lending even when faced with a hypothetical jolt to the U.S. economy lasting into 2015, including a severe drop in housing prices and a spike in unemployment. The Fed’s annual “stress tests” are designed to ensure large banks can withstand severe losses during times of market turmoil…
The stress-test results will be a factor in the Fed’s decision next week to approve or deny individual banks’ plans for returning billions of dollars to shareholders through dividends or share buybacks. But a good performance on Thursday’s test is no guarantee, since the Fed also will consider more subjective factors such as the strength of a bank’s internal risk management… (more)
