SIX of America’s biggest banks face a new round of stress tests as the Federal Reserve shows increasing concern over the Eurozone debt crisis.
The tests against a possible market shock will take in Bank of America Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo, which all have large trading operations.
Yesterday the Fed said its global market shock test for those banks will be generally based on price and rate movements that occurred in the second half of 2008, and also on “potential sharp market price movements in European sovereign and financial sectors”.
The scenario will also include a rise in US unemployment to 13 per cent and an eight per cent fall in output in gross domestic product.
The capital plans of 12 other financial firms, considered as less complex, also face scaled-back tests. The results are due to be published next year.
The Fed plans to release more information than it did last year about the tests’ results. The regulator said it is doing so to “foster market discipline”.
The Fed will disclose the estimate of revenues, losses and capital ratios of the 19 biggest banks if they were to suffer a market shock.