Credit Suisse was the only company on Wall Street that failed the Federal Reserve's annual stress test as competitors from J. P. Morgan Chase to Bank of America were given approval to increase dividends and repurchase shares.
The US department of Credit Suisse, headquartered in Zurich, has until October 27 to fix issues that the Fed has found in its capital planning processes, according to the Federal Reserve. In particular, the Fed noted that assumptions made by the bank for trading losses in a tight scenario had weaknesses. Credit Suisse must keep its capital distributions at the level of 201
In this year's annual ruling of the regulator, 18 of the largest US-based institutions had to prove they could survive an economic downturn, maintaining the ability to lend and continue to pay dividends. This depends on the capital of a bank or the difference between assets and liabilities, which acts as a buffer to absorb losses.
With the exception of Credit Suisse, each bank has been authorized to increase shareholder distributions as part of its proposed capital plans. Credit Suisse received a conditional non-opposition that has the same designation Goldman Sachs and Morgan Stanley received last year. In the tests of 2018, the two US investment banks fell below the minimum capital level in a strained scenario.
Nevertheless, no bank has failed the 2019 Fed stress test round. This was the second time since the beginning of the annual review in 2009 (The name given to Credit Suisse is a sort of middle ground between existence and non-existence.)
Overall, the results show that the banking sector is facing a downturn in the financial crisis Decades ago, when the US had done so, lenders are robust. The industry has strengthened its rigorous plans for worst-case scenarios, more than doubling the capital needed to absorb losses to around $ 800 billion.
"The stress tests have confirmed that the largest banks have both good capital and high-priority capital planning," Randal Quarles, deputy supervisor, said in a statement. "The results show that these companies and our financial system are stable in normal times and under stress."
Another contested company, Deutsche Bank, has passed this year's stress test after failing last year. The US Department of Deutsche Bank has made progress in solving its data management and revenue and loss forecasting, according to a senior Fed official.
J.P.. Morgan and Capital One stuck to their original capital plans by re-submitting their payout plans and using a so-called Mulligan to stay above the required minimum levels, the Fed official said.