When all you read is gloom, turn here for a much different perspective.

Thursday, June 29, 2017

Stress Tests Clear All Banks -- Most to Issue Payouts Above Expectations

Remember the panic back in 2009?  All the banks were going to fail, right?

Remember we reported that "Tarp was working?"

Remember the stress tests?

Big U.S. banks plan to increase dividend payouts and share buybacks to their highest levels in years after the Federal Reserve on Wednesday approved capital plans for all 34 firms taking part in its annual stress tests.

The paybacks announced by banks following the tests’ release Wednesday were in many cases *above* what investors had expected.

Fed governor Jerome Powell said the stress-test process, now in its seventh year, “has motivated all of the largest banks to achieve healthy capital levels.”

Because of the great recession and potential financial meltdown, the stress tests were put in place.  With the tests in mind banks develop risk-management systems each year to meet the Fed’s test expectations.
This year’s passing grades suggest that those efforts have paid off. Banks today are better capitalized and more conservatively managed than in the years before the financial crisis and have better insight into risks lurking in their own books.
So bottom line, TARP did work.

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