Fed to Release Stress Test Results on Wednesday

The stress tests created for banks by U.S. regulators after the 2008 financial crisis may prove their worth this week, providing a timely message on banks’ hardiness in the midst of turbulence over last week’s vote by Britain to leave the European Union.

The Federal Reserve will release the second set of results from stress tests it has conducted annually on large banks since 2009 on Wednesday. The tests look at how strong banks would be in the event of an unforeseen crisis, with economies in freefall, stock markets dropping precipitously and market counterparties at risk of failure.

And while the stresses that the Fed is testing for in this case are imagined, analysts say the results should be reassuring to investors worried about banks’ exposure to Brexit, an outcome that took the world and markets by surprise.

“This is a real-world test that can help demonstrate the greater resiliency of banks’ balance sheets and the benefits of de-risking that, while having hurt revenue this decade, should help incrementally in times such as this and show the relative strength of U.S. banks,” said CLSA bank analyst Mike Mayo.

via Reuters

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