29 June 2023
The Federal Reserve’s stress tests show that the largest US banks would lose $541 billion in a doomsday economic scenario but still have enough capital to absorb the losses. This has led to optimism among Wall Street executives for higher dividends and share buybacks. However, the recent failures of Silicon Valley Bank, Signature Bank, and First Republic have raised concerns about the regional banking crisis. The stress tests are just one way to measure strength, and regulators should remain cautious about potential risks. Despite the positive results, new international standards may require American banks to hold more capital. The reforms since the 2008 crisis are seen as achieving a stronger banking system, but some argue for more stringent requirements. The inclusion of mid-sized banks in future stress tests is expected, considering recent events.