The first part of a long-awaited two-stage stress test for the big banks is in, and all but one stayed above minimum financial ratios set out in the test.
That’s according to initial Federal Reserve results released Thursday, seeking to find out if 18 of the largest financial institutions could withstand a deep recession like the credit crunch of 2008.
Ally Financial Inc., majority owned by the government, was the only bank that failed to meet one of the key ratios. The test showed that Ally had 1.5% in capital set aside under a measure known as Tier 1 common ratio, which compares the bank’s common equity to its risk-weighted assets.
That is significantly below the generally accepted standard of 5%. The other 17 institutions fared better, but many experienced major mortgage, securities and loan losses under the recession scenario.
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