Fed: Stress tests show banking system stronger

March 20, 2014 at 4:58 PM

WASHINGTON, March 20 (UPI) -- The 2014 stress tests show the largest U.S. banks would better withstand a severe economic slump now than they did in 2008, the Federal Reserve said Thursday.

The Fed released the results of the tests, which involve determining how banks would fare in various scenarios.

In the most severe, banks would lose $366 billion through loan defaults, the Fed said. That would involve a big and speedy rise in unemployment, a 50 percent decline in stock prices and a fall in the price of homes to 2001 levels.

"The annual stress test is one of the Federal Reserve's most important tools to gauge the resiliency of the financial sector and to help ensure that the largest firms have strong capital positions," Federal Reserve Governor Daniel K. Tarullo said. "Each year we are making substantial improvements, which have helped make the process even stronger than when we first conducted the stress tests in the midst of the financial crisis five years ago."

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