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Bank Stress Tests 29% Stock Market Drop – 1/30/12

Fed to release big bank stress tests March 7

Bank Stress Tests Stock Market DropThe Federal Reserve said Monday it was conducting stress tests on 30 big financial institutions and it will release results from 19 of the banks on March 7, as part of its effort to ensure large institutions have enough capital to withstand a deep recession and sharp drop in stocks. It added that the results of stress tests conducted on 11 other institutions won’t be released. The Fed said one week later it will release results of alternative tests and reviews of dividend plans for the largest institutions. On Monday the Fed also released additional details of its severely adverse scenarios for six banks with large trading operations. These institutions, Bank of America (US:bac), Citigroup (US:c), Goldman Sachs (US:gs), J.P. Morgan Chase (US:jpm), Morgan Stanley (US:ms) and Wells Fargo (US:wfc), will need to consider a global market shock that includes having equity markets and dividends in the U.S. dropping significantly. In the severely adverse market shock scenario, equity markets it the U.S. would drop 29.43% while equity markets in the U.K. would drop by 21%.

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