Late Tuesday, the Federal Reserve announced plans to launch a special stress test for six large American banks (NYSEARCA:XLF) against a hypothetical global market shock, including a deepening euro zone debt crisis. In total, 31 firms will be stress tested, an increase from the Fed’s previous stress test of 19 firms.
The hypothetical global market shock will include price movement changes similar to the ones that occurred after Lehman Brothers collapsed. The stress test also places the unemployment rate at 13% by the first quarter of 2013. The stress test will determine if banks (NYSE:BKX) can raise dividends or buyback shares. The banks must submit their capital plans by January 19, 2012.
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The large six banks directly affected by the stress test are listed below:
Bank of America (NYSE:BAC)
Wells Fargo (NYSE:WFC)
JP Morgan (NYSE:JPM)
Morgan Stanley (NYSE:MS)
Goldman Sachs (NYSE:GS)
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