Published on 28 Jun 2022 on Zacks via Yahoo Finance

Time for Bank ETFs After Successful Fed Stress Test?

U.S. banking biggies have cleared the key Stress Test conducted by the Federal Reserve in 2022.The results of the stress test dictate how much capital banks need to be healthy and how much they can return to shareholders.

The annual stress tests were established by the Fed, following the 2008 financial crisis, as a measure to ensure that banks could withstand any similar shock in the future. The balance sheets of major banks like JPMorgan (JPM), Bank of America (BAC), Citigroup (C) and Goldman Sachs (GS) are tested against an extremely hypothetical economic downturn, the elements of which change annually.

This year, all of the 34 biggest lenders that have been tested have cleared the results. The 2022 stress tests’ focus is on an employment crisis that sends the jobless rate to more than 10% for at least two years, plus a 40% drop in commercial real estate prices.