For the first time since the Central Bank started stress tests in 2009, no major bank fell below any of the main capital thresholds. The annual tests are a centerpiece of the Fed’s efforts to prevent a repeat of the 2008 financial crisis and to gauge the ability of banks to withstand economic shocks. Shareholders will be happy since banks now have wiggle room to return capital back to them.
Bank of America Corp. was the only bank among the six largest to improve in every capital measure from its performance in last year’s test. Wells Fargo & Co. surpassed every minimum by at least 2 percentage points. Morgan Stanley’s ratio in three capital measures fell in a severely adverse scenario to within 1 percentage point of the required minimum. Loan-loss estimates for the 31 banks totaled $490 billion under a hypothetical severely adverse scenario, down from $501 billion for the 30 banks tested last year. The losses include a $102.7 billion hit to trading. JPMorgan Chase & Co. would suffer the most from trading losses, estimated at $23.6 billion.