UPDATE: Federal Reserve To Release Stress Test Results Thursday At 4:30 PM EDT
13 March 2012 - 9:27AM
Dow Jones News
The Federal Reserve plans to release results of its latest bank
stress tests Thursday at 4:30 p.m. Eastern time, the central bank
said Monday.
The Comprehensive Capital Analysis and Review, or CCAR, looks at
how the 19 biggest U.S. banks would perform in a severe
downturn--including a peak unemployment rate of 13%, a 50% drop in
equity prices and a 21% decline in housing prices.
"The stress-test results, including projected capital ratios,
revenues and losses in the supervisory stress scenario, will be
disclosed for the 19 large bank holding companies that
participated," the Fed said Monday.
The banks will be individually informed about the results of the
test during the day on Tuesday, and the Fed will provide broader
information during a conference call for bankers Tuesday afternoon,
according to people briefed on the matter.
Some boards have discussed the range of dividends and share
buybacks and are standing by for the Fed's go ahead. Management
doesn't have a formal rebuttal period, the people said, but bankers
can demand changes if there are factual or technical errors in the
analysis.
Three years ago, as the financial crisis was abating, the Fed
published potential loan losses and how much capital each
institution would need to raise to absorb them. This time around,
the Fed has pledged to release a wider array of information.
The Fed on Monday released a paper describing the methodology
used in the stress test as well as the templates for disclosure of
the summary results.
One new template has the names of the banks and two columns.
The first column shows capital ratios in the event there aren't
dividends, share buybacks or issuances. That allows investors to
compare the banks' relative strength--apples to apples--because it
assumes no capital distributions after March 31.
The second shows ratios if banks execute proposed capital plans,
and would indicate if any bank fails the stress test by dipping
below the minimum level set out by the Fed.
Investors won't be able to determine the capital plans the banks
have proposed.
The Fed isn't forecasting a severe recession. But the central
bank said: "Strong capital levels are critical to ensuring that
banking organizations have the ability to lend and to continue to
meet their financial obligations, even in times of economic
difficulty."
Bankers, citing competitive concerns, are pressing the Fed to
limit its release of information.
-By Jeffrey Sparshott and Matthias Rieker, Dow Jones Newswires;
202-862-9291; jeffrey.sparshott@dowjones.com
--Dan Fitzpatrick and Victoria McGrane contributed to this
article.
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