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17 of 18 largest banks in U.S. pass Fed stress test


08:16, March 08, 2013

WASHINGTON, March 7 (Xinhua) -- U.S. Federal Reserve on Thursday announced that 17 of the 18 largest banks passed the latest round of stress test, evidence that most U.S. big banks have enough capital buffers to withstand a deep economic recession.

"The nation's largest bank holding companies have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis," the central bank said in a statement releasing results of the bank stress tests.

Banks participated in this round of stress test included Citigroup, JPMorgan Chase, Morgan Stanley and Wells Fargo.

Government-controlled Ally Financial Inc., the former financial arm of General Motors, was the only bank to fail the annual stress test, as its Tier 1 common capital ratio, a measure of financial strength, fell below the required 5 percent in the test.

Under the most severe scenario of the test, U.S. unemployment rate will reach 12.1 percent, stock values will shed more than 50 percent, and the housing prices will plummet more than 20 percent.

"The stress tests are a tool to gauge the resiliency of the financial sector," U.S. Fed Governor Daniel Tarullo said.

"Significant increases in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty," Tarullo said.

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