US banks get new set of stress tests scenarios

[WASHINGTON] Lenders including JPMorgan Chase & Co and Citigroup Inc will have to show they can survive the demise of a trading partner or a plunge in value of high-risk business loans in the 2014 version of US stress tests.

The scenarios for the annual tests, outlined by the Federal Reserve in a statement on Friday, reflect some of the most pressing threats seen by regulators as they gauge the ability of the US financial system to withstand economic shocks. Bankers will have to show what would happen to the value of leveraged loans they hold, the impact of another housing bust and how they'd fare if a firm that owes them substantial sums collapses.

The test was designed in part to build resiliency against what some see as emerging asset bubbles, said a Fed official who spoke on a conference call with reporters. The counterparty failure test aims to prevent a repeat of the 2008 crisis, when distress at Lehman Brothers Holdings Inc. and American International Group Inc. threatened to destroy their biggest trading partners.