Backed by adequate capital levels, the nation's largest banks are meeting expectations for capital planning, the Federal Reserve said Thursday.
Each of the 18 banks the Fed reviewed, including J.P. Morgan Chase, Goldman Sachs and Morgan Stanley, passed round two of its annual stress test.
The banks all passed round one last week when the Fed said under a worst-case scenario they would lose $410 billion, but they would still have enough capital to meet regulatory requirements.
Now, after evaluating the capital planning processes and capital adequacy of the 18 banks, the Fed said they have sufficient capital levels to absorb losses and help ensure that banking organizations have the ability to lend to households and businesses even in times of stress. Moreover, the banks' planned capital actions, such as dividend payments and share buybacks, also passed the test.
The firms in the test have significantly increased their capital since the first round of stress tests in 2009, the Fed noted. The largest banks have more than doubled their common equity capital from around $300 billion to roughly $800 billion during that time.
"The stress tests have confirmed that the largest banks are both well capitalized and place a high priority on strong capital planning practices," said Randal K. Quarles, Fed vice chairman for supervision, in a statement accompanying the results. "The results show that these firms and our financial system are resilient in normal times and under stress."
While the Fed did not object to the capital plan from the Credit Suisse Holdings, it is requiring the firm to address certain limited weaknesses in its capital planning processes. Credit Suisse will have until Oct. 27 to address the issue, the Fed said.
