WASHINGTON - The biggest U.S. banks would have enough capital to withstand severe economic and market turmoil, the Federal Reserve's annual "stress test" exercise showed on Wednesday, but firms faced steeper hypothetical losses this year due to riskier portfolios.
However, the test did find banks suffered steeper losses this year, and not because the test got tougher. The 2024 version of the stress test was broadly similar to last year's, and the Fed said the higher losses were due to how bank portfolios have shifted in the last year. The banks that were tested would suffer a combined $685 billion in losses under a hypothetical severe scenario. On average, banks saw their capital ratios fall by 2.8 percentage points, the steepest decline since 2018.
While banks were expected to perform well under this year's exam as they have in years prior, the annual results are significant for each firm because how well they perform dictates how much capital they must hold against potential losses. Excess funds beyond those capital levels can then be returned to shareholders.This dividend stock is sure to benefit from ongoing cuts in the key interest rate and is already seeing some major opportunities ahead.
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