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Fed announces third round of bank stress tests

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Tuesday, November 22, 2011 - 5:46pm

WASHINGTON (AP) — The Federal Reserve announced on Tuesday that it would conduct a third round of stress tests to determine if major U.S. banks can withstand a downturn in the economy.

The latest round of tests comes at a time when many are concerned about U.S. banks' exposure to the European debt crisis, which could throw that region into a recession and rattle global financial markets.

Vice Chairman Janet Yellen last week said the Fed would purse the stress tests in coming weeks.

The Fed performed the first stress tests in the spring of 2009. The country's 19 largest banks participated. The initial stress test reassured investors that America's biggest banks had the resources to get through the recession and the 2008 financial crisis.

For the latest test, the field has been expanded to 31 banks. The financial regulatory overhaul passed last year requires banks with at least $50 billion in assets take part.

Banks have until Jan. 9 to submit the information to the Fed. They must show they have enough capital reserves to withstand projected loan losses from an economic downturn.

The central bank will review the information and then make determinations on whether the banks passed the tests. Fed officials said no time frame has been set for when it will announce the results.
 

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