The Federal Reserve announced on Tuesday that most of the major banks in the U.S. could withstand a severe recession, according to results of its latest round of “stress tests.” 15 of the 19 largest U.S. bank holding companies passed the stress tests that are imposed to determine how major financial institutions would fare in the event of an economic downturn. Even under depression-like circumstances, the banks could maintain key capital ratios while continuing to make loans to individuals and businesses, raise dividends and initiate stock buyback programs. However, the four banks that failed to pass the tests—Citigroup, Sun Trust, MetLife and Ally Financial—are now under pressure to show signs of improvement. Under The Fed's presumed worst of circumstances, the 19 bank holding companies would suffer losses of $534 billion over nine quarters, though The Fed has repeatedly emphasized such a major downturn is unlikely.
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