What to Expect From Bank Stress Tests

Jerome Powell, President of the US Federal Reserve. USA, speaks during a Senate Banking Committee hearing in Washington, DC, USA. USA, Wednesday February 12, 2020.

Andrew Harrer | Bloomberg | fake pictures

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The US financial system. USA It has already been hit by a global crisis this year, but investors will know Thursday whether the Federal Reserve believes banks are prepared for further complications.

The Fed’s “stress tests”, which are designed to see how banks’ financial structure is doing in adverse scenarios, include new scenarios related to the pandemic this year. One of them is a W-shaped recovery, in which economic restrictions are re-imposed to stop the coronavirus, which closes many companies once again.

The first results of these exercises are scheduled to be published after the bell on Thursday. Weak performance could affect the chances that banks will continue to issue their dividends, which several Fed officials have asked to suspend.