Banks in US brace for second part of Fed's stress test

Washington

THE largest US banks and their foreign rivals are facing a tough two-step check-up of their financial health by the Federal Reserve, forcing the firms to get a far better grip on how they measure risk.

In its annual "stress tests", the Fed gauges whether banks have enough shareholder capital to withstand a severe economic shock like that of the 2007-09 crisis, when taxpayers spent billions of dollars to keep the industry afloat. It is scheduled to publish the first leg of the tests, announcing which of the 31 banks have dropped below the 5 per cent minimum for top-tier capital.