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Fed outlines stress test plans

More stress tests will be carried out on the biggest US banks this year, the Federal Reserve (Fed) has announced.

Following a meeting of policymakers at the central institution yesterday (9 October), it emerged that the country's 19 largest financiers - which first underwent such examinations last year - will be tested in the coming months.

Other major lenders - which the Fed defines as those with in excess of $50 billion in assets - are scheduled to be scrutinized in September 2013, but smaller banks are to be granted an extension of 12 months before they undergo tests.

Daniel K Tarullo, governor of the Fed, said the implementation of the stress tests put forward in the 2010 Dodd-Frank law represent an important step in the body's efforts to promote the health of the financial sector.

"Stress testing is a key tool to ensure that financial companies have enough capital to weather a severe economic downturn without posing a risk to their communities, other financial institutions ... or the general economy," he added.

By Tony Aynsley