Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Fed eyes trouble in commercial real estate, corporate debt in 2021 stress tests

Stock MarketsFeb 12, 2021 09:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: The Federal Reserve Board building is pictured in Washington 2/2

By Pete Schroeder

WASHINGTON (Reuters) - The U.S. Federal Reserve on Friday unveiled the hypothetical recession it plans to test large banks against in its 2021 stress tests, which includes "substantial stress" in the commercial real estate and corporate debt markets.

The scenarios also envision a global recession where U.S. unemployment jumps to 10.75%, economic growth falls by 4%, and the stock market sheds 55% of its value. Nineteen of the nation's largest banks will be subject to this year's test, with results published sometime in the summer.

“The banking sector has provided critical support to the economic recovery over the past year. Although uncertainty remains, this stress test will give the public additional information on its resilience,” Vice Chair for Supervision Randal K. Quarles said in a statement.

The 2021 test will mark a return to normalcy for the Fed, which resorted to testing banks twice last year after it became clear the economic impact from the coronavirus pandemic had actually exceeded the severe downturn envisioned by the Fed's original test.

But after both tests, the Fed said that it found the largest banks remained well-capitalized despite severe downturns, and in December it relaxed restrictions on capital payouts like stock buybacks.

The upcoming test will apply to 19 of the nation's largest banks, although smaller firms that are now tested on a two-year cycle could opt into this year's test if they so choose. Ten of the banks with the largest trading operations will also be tested against a hypothetical global market shock, while 12 of the firms with significant trading or processing operations will also be tested against the failure of their largest counterparty to test their resilience.

Fed eyes trouble in commercial real estate, corporate debt in 2021 stress tests
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Jasper Yu
Jasper Yu Feb 12, 2021 11:35AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Stress testing is a joke, since the very beginning.
Patron Silver
Patron Silver Feb 12, 2021 9:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
conspiracy guys will be claiming this is a plan not a test
Kristof Naessens
Kristof Naessens Feb 12, 2021 9:36AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The Fed is the cause, not the solution!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email