Federal Reserve picked the brain of a wise man when they started taking the US banking system seriously. Oh! Or was it the 2008 economic crisis that forced them to think straight?
Whatever the case was, the US central bank has taken a serious notice of the US banks and late in 2011, laid out a stress for 19 banks in the country to gauge their performance in any event that could mirror 2008 scenario.
The test comprised of hypothesized stressed out scenario that included an adverse scenario of 13% unemployment, a 50% drop in equity markets and a 21% decline in housing prices.
15 of the 19 banks passed the exam, some of them in flying colour, but four could not catch-up with the drift. Most have announced the results of the stress test and many are already out with details on returning capital to shareholders — or the U.S. government in one instance. A bank-by-bank breakdown is below.
Following is the list of the banks that were put under scrutiny.
Bank of New York Mellon
The bank passed stress test with 13% capital ratio and said it will move ahead with $1.16 billion stock repurchase. The bank also affirmed a dividend of 13 cents per share.
The bank cleared stress test with 12.5% capital ratio.
The credit card company cleared the stress test with 10.8% capital ratio. Raised dividend to 20 cents, from 18 cents, and authorized $4 billion 2012 buyback, up to $1 billion in 2013.