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Banks Must Weather China Slump in Fed’s Worst-Case Stress Test
The Federal Reserve announced scenarios for its annual stress tests of the 30 largest banks, overhauling one to assume a “sharp” slowdown in China coupled with a deep U.S. recession. In the worst of three scenarios, U.S. gross domestic product plunges 6.1 percent in the first quarter of 2013 and the unemployment rate averages as much as 12.1 percent in the second quarter of 2014 -- an economic shock on the same scale as last year’s stress test. Recessions in the euro area, the U.K. and Japan are also features of the “severely adverse” scenario. The main difference from last year is a more substantial ... (full story)