US banks pass stress test with no problems

The largest American banks pass the stress test without any problems

All American banks passed the test well.

Steven Senne/AP

(dpa) According to the Federal Reserve (Fed), the largest financial institutions in the USA have crisis-proof capital resources. All 34 major banks have passed the financial regulator’s annual stress test, as the Fed announced in Washington. In a scenario that assumed a recession, the 34 banks audited maintained an average capital ratio of 9.7 percent, more than double the required level. In the test, the supervisors want to ensure that lending to companies and households does not come to an abrupt halt in the event of a financial market collapse.

The big Swiss banks also did well in the test. The American subsidiary of Credit Suisse, which only got through under certain conditions in 2019, was even able to show a capital ratio of 20.1 percent. The subsidiary of UBS came to 15.5 percent. Deutsche Bank’s American subsidiary also had no problems with the stress test. This had failed the test several times in recent years. It now passed with a high capital ratio of 22.8 percent.

The stress tests are a consequence of the 2008 financial crisis. They are intended to prevent banks from having to be rescued again with tax money. To do this, the Fed examines whether the capital reserves are sufficient to withstand extreme loads such as a rapid increase in unemployment or a collapse in real estate prices. For many of the big banks, the annual audit is crucial in order to be able to distribute money to investors in the form of dividends or share buybacks. From Monday they are allowed to publish their capital plans.

Due to the Corona crisis, the Fed had checked the balance sheets particularly meticulously and at times imposed strict conditions on maintaining the cash reserves. Share buybacks and dividend increases were temporarily taboo or linked to strict conditions.

UBS advisor spends millions of client money on affairs

(Bloomberg) A former UBS Group AG financial adviser has been sentenced to 6.5 years in US prison for siphoning off around $6 million in client funds. According to the Miami prosecutor’s office, he spent most of the money on extramarital affairs.

In order to pull off the fraud, the now-convicted financial advisor misrepresented the actual performance, balance, and yield of the accounts he managed, according to the press release on the subject. He also forged customers’ signatures on documents supposedly authorizing transfers from the accounts.

As part of the sentence, the ex-banker will also lose his interest in a home in Ave Marie, Florida.

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