Fed to Stress-Test 33 Banks on Weathering Global Recession
- Worst scenario includes U.S. unemployment rising to 10%
- Adverse scenario would entail declining U.S. interest rates
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The Federal Reserve said it will analyze in its annual stress tests how 33 large banks, including Bank of America Corp. and JPMorgan Chase & Co., would withstand a severe global recession, a doubling of the U.S. unemployment rate to 10 percent and moderate deflation.
The exams, using hypothetical scenarios, are a centerpiece of U.S. regulators’ efforts to prevent a repeat of the 2008 financial crisis. The Fed uses the tests to push lenders into building up capital buffers. Companies that fail may not be allowed to buy back their own stock or raise dividends.