Major banks in US all pass first phase of stress tests

WASHINGTON: The 31 largest banks in the United States passed the first phase of regulatory stress tests, the Federal Reserve announced Thursday.

But the three leading investment banks Goldman Sachs, JPMorgan Chase and Morgan Stanley were among the worst performers, mainly because of their greater exposures to capital markets.

In tests of their strength to withstand a severe economic crisis -- one worse than that of 2008 -- all the banks proved capable of maintaining more than the minimum 5.0 percent level of core capital.

But the tests showed the investment banks with the largest exposure to capital markets came out among the weakest: Goldman's Tier 1 capital ratio fell to 6.3 percent, JPMorgan 6.5 percent, and Morgan Stanley 6.2 percent.

The worst performer, as in last year's stress tests, was Zions Bancorp of Salt Lake City, which barely topped the minimum with a core capital ratio of 5.1 percent.

Also coming in low in the severe-crisis scenario was BBVA Compass Bancshares, at 6.3 percent.

But as a group the banks were stronger that in the 2014 tests.

Their average actual Tier 1 capital ratio going into the test was 11.9 percent, up from 11.5 percent a year ago. In the test the group average fell to 8.2 percent, compared with 7.6 percent last year.

"The largest US-based bank holding companies continue to build their capital levels and to strengthen their ability to lend to households and businesses during a period marked by severe recession and financial market volatility," the Fed said.