News / USA

Federal Reserve: Almost All Big US Banks Could Withstand Economic Jolt

Federal Reserve Chair Janet Yellen speaks during her first news conference at the Federal Reserve in Washington, March 19, 2014.
Federal Reserve Chair Janet Yellen speaks during her first news conference at the Federal Reserve in Washington, March 19, 2014.
VOA News
The U.S. central bank has concluded that almost all of the country's biggest banks could withstand a severe economic downturn.

The Federal Reserve said that 29 of the country's 30 biggest banks -- excluding a regional bank in the western U.S. -- have enough money on hand to withstand a hypothetical deep recession. Such a downturn would include a sharp rise in unemployment, a nearly 50 percent drop in the country's major stock indexes and a steep drop in home prices.

The central bank said the annual survey of the banks shows broad improvement in their financial standing since the country's recession five years ago, its worst in seven decades.

Analysts say that the better outlook for the banks could allow them to again pay dividends to their shareholders for the first time in recent years. One survey of bank profits showed that the six biggest U.S. banks earned $76 billion in profits last year, close to their collective all-time high.

Meanwhile, the Fitch credit rating agency has issued a AAA rating with a stable outlook for the United States.

Fitch made the announcement Friday, saying the new action resolved the negative watch the U.S. received in October.

The agency noted that last year's U.S. debt ceiling crises had not negatively affected U.S. bond yields or reduced foreign holdings of Treasury securities. Fitch said, "therefore Fitch does not believe the role of the U.S. dollar, sovereign financing flexibility or debt tolerance has been materially damaged." The ratings agency said the U.S. has achieved "strong fiscal consolidation."

The agency said the U.S. economy is one of the most "productive, dynamic and technologically advanced in the world," underpinned by strong institutions, a favorable business climate and efficient product and labor markets.

Fitch said the U.S. has greater debt tolerance than its AAA peers, owing to the "unparalleled financing flexibility provided by being the issuer of the world's pre-eminent reserve currency and benchmark fixed income asset."

Fitch said the country's capital markets are "the deepest and most liquid in the world."

Some information for this report was provided by Reuters.

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Comment Sorting
by: Not Again from: Canada
March 24, 2014 10:10 AM
Great care must be taken, by economic leaders, not to become speculators, and even worse doomsday predictors. Witchcraft/hairy fairy based pronostications have no place by those in charge of US/Global international/national financial institutions, especially when the markets are weak, recovery is taking place very slowly, and environmental factors, this past Winter have in fact slowed down some outputs. Stability starts at the barain and mouth of those that have the economic levers. Crying wolf, may actually attract the wolf, especially when the wolf is nearby and hungry.

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