Fed to stress-test 31 large US banks for dire scenarios

New York

THE Federal Reserve said it will scrutinise how 31 large US banks, including JPMorgan Chase & Co and Citigroup Inc, would respond to a plunge in equity and housing prices and a sharp downturn in the global economy.

The annual tests, using hypothetical scenarios that are not forecasts, are the cornerstone of the Fed's efforts to prevent a repeat of the 2008 financial crisis and to gauge the ability of banks to withstand economic turmoil. The Fed uses the exams to prod lenders into building up capital buffers. Firms that fail may have to forgo stock buybacks and higher dividends.