Fed says tests show 18 biggest US banks in stronger position to withstand sharp recession

WASHINGTON – The Federal Reserve says the nation’s largest banks are more prepared to withstand a severe U.S. recession and a global downturn than at any time since the 2008 financial crisis .

The Fed’s latest annual “stress tests” show that the 18 banks hold fewer bad loans compared with last year, helped by a stronger economy. The Fed will announce next week whether it will approve the banks’ plans to issue dividends or repurchase shares.

Under the stress tests’ most severe scenario, the U.S. would undergo a recession in which unemployment would reach nearly 12 per cent, stocks would lose half their value and home prices would plunge 20 per cent.