Big banks could lose a whopping $541bn in a doomsday scenario says the Fed in its annual stress test.
The passing grades given by the Fed on Wednesday to banks including JPMorgan Chase and Goldman Sachs lent support to claims from Wall Street executives and regulators that systemically important banks can withstand heavy losses.
In other words, big banks such as JPMorgan and Goldman Sachs are too big to fail despite big turbulence in the banking sector.
JPMorgan and Goldman Sachs are two of the most scandalous banks with numerous fraud and market manipulation cases held against them.
It comes as no surprise that these banks will be left standing when smaller banks get acquired or end up collapsing.
JPMorgan recently deleted 47 million emails required in a probe by the SEC and Fed — the bank paid only $4 million in fees and neither admitted nor denied any wrongdoing.
According to the SEC, JPMorgan has been unable in at least 12 civil securities-related regulatory probes to comply with subpoenas and document requests for communications that had been permanently deleted.
The bank also paid a $290 million settlement related to the Jeffrey Epstein case in attempts to stay away from the spotlight any longer.
The Fed stress tests are an annual exercise required under the post-2008 crisis Dodd-Frank financial regulations that gauge whether banks’ loss-absorbing capital ratios would remain above minimum requirements in the event of an economic catastrophe.
This year, banks needed to show they could withstand unemployment rising to a peak of 10%, commercial real estate prices plunging 40%, house prices declining 38% and short-term interest rates falling to almost zero, per FT.
Of the 23 banks tested, Deutsche Bank’s US subsidiary suffered the biggest capital hit, followed by UBS Americas.
A New Study Shows Americans Pulled $472bn From Big Banks
A new study shows that Americans pulled $472bn from big banks, more than the $100 billion priorly reported.
“First-quarter 2023 deposits dropped a record amount across U.S. banks — the steepest fall since the Federal Deposit Insurance Corp. starting collecting the data in 1984.
The $472 billion outflow in deposits outpaced the drop that banks saw following 2008 financial crash,” says Boston Business Journal.
This shatters a 39-year record.
The “primary driver” of deposit flight came from uninsured deposits, says the FDIC, as people moved to protect capital that is above the $250,000 FDIC insured maximum.
However, online-only banking models have become a big competitor to traditional banks.
So much in fact that big banks have begun to close several branches across the country.
In Philadelphia, Wells Fargo has closed 17% of its local bank branches since 2020.
PNC is not far behind, shuttering 15% of its branches in the Philadelphia area, per the Philadelphia Business Journal.
As depositors leave the banking system, money market funds have witnessed massive weekly cash inflows.
Other banks have begun to freeze bank deposits and new bank accounts.
Read: New Study Shows Nearly 190 Banks on Verge of Collapsing
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