Deutsche Bank was the only major financial institution to fail the Federal Reserve’s annual stress text exam, dealing another blow to Germany’s largest lender.
The Fed raised more moderate concerns about Goldman Sachs and Morgan Stanley that will prevent those Wall Street banks from raising their dividends and buying back more of their stock. The stress test also revealed State Street would suffer “large losses” if one of its business partners came under financial pressure.
Despite those concerns, the Fed’s stress test results reflect a US banking system that has dramatically strengthened from the financial crisis a decade ago. Regulators gave a green light to the vast majority of the 35 largest US banks.
In a stress test, the Federal Reserve considers how banks would hold up under the severe strain of a recession or financial market turmoil. Lenders are also evaluated based on qualitative factors, including risk management, internal controls and government practices. The Fed then passes judgment on each bank’s plan to reward shareholders with higher dividends and stock buybacks.
This is a developing story.
CNNMoney (New York) First published June 28, 2018: 4:31 PM ET