Goldman and Morgan Stanley scrape through Fed test

Michael Bow
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BANKING giants Goldman Sachs and Morgan Stanley were yesterday ranked among the least robust institutions on Wall Street in the event of a severe and prolonged financial meltdown, according to the Federal Reserve’s stress tests.

The tests, undertaken every year on the biggest banks in America, shows how resilient a bank’s balance sheet would be in the face of massive unemployment and a stock market and house price crash.

It rates banks using a ratio of tier one common equity to risk weighted assets, with a ratio of five a pass.

Just one out of the 18 banks failed to reach the figure. The result could affect dividend and buyback policies on the banks. Regulators will use the test results to see whether banks can give more money to shareholders.