America’s biggest banks would face losses of almost half a trillion dollars should a deep financial crisis and recession hit the US again, regulators said.
The losses of $462bn (£308bn) for the country’s biggest 18 banks were projected by the Federal Reserve’s ‘stress test’, an annual exercise the central bank now conducts to monitor the resilience of the financial system.
The losses would be racked up under the Fed’s most extreme scenario in which unemployment climbs to 12pc, house prices tumble 21pc and stock markets halve in value over the next two years. Overall, the Fed said that just one of the banks it tested, Ally Financial, failed to maintain a 5pc Tier 1 common equity ratio – a key measure of a lender’s health – under the most extreme scenario.
Banks “have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis,” the Fed said last night.