All but one of the 30 largest banks are now strong enough to weather another severe economic crash, the Federal Reserve said Thursday.
In the newest of the series of health examinations mandated after the 2008 financial crisis, only Zions Bancorp could not measure up to a basic capital standard in a theoretical drastic meltdown of the economy.
Twenty-nine bank holding companies held up in the worst-case scenario with a cumulative 7.8 percent Tier 1 common ratio, a basic measure of capital strength, down from 11.5 percent at the end of the third quarter last year, but ending well above the 5.0 percent minimum target.
That represented a steady strengthening of the sector since the tests began three years ago,
Salt Lake City, Utah-based Zions Bancorp was the only one which fell below the threshold, finishing the year-long period of the theoretical meltdown with just a 3.5 percent tier 1 common ratio — the level of shareholder equity and reserves.
The banks were measured against a situation when real gross domestic product contracts 4.75 percent, the unemployment rate hits 11.25 percent, equities shed half their value and home prices lose a quarter of their value.
[Image via Agence France-Presse]