After spending nine months in suspense, Bank of America on Thursday squeaked by the Federal Reserve’s stress tests for banks.
The central bank on Thursday announced that it had not objected to a resubmitted capital plan from Bank of America, meaning that the country’s second-largest bank will be able to pay out dividends to shareholders without interference from the Fed.
The Fed said, however, that the bank “must continue to make steady, demonstrable progress” in its risk management before next year’s round of stress tests.
During this round, Bank of America got a provisional pass. It had until Sept. 30 to resubmit a plan that addressed problems with its modeling of revenues and losses and internal controls. The Fed did not specify what the problems were.
The stress tests are meant to boost confidence that banks could survive a financial crisis. Regulators simulated what would happen to the banks in a scenario in which unemployment spiked, stocks fell by one-quarter, housing prices collapsed, and companies defaulted on debt in large numbers.
Bank of America was the only bank to receive such a provisional pass. The U.S. arms of two non-U.S. banks failed: Deutsche Bank, headquartered in Germany, and Santander, based in Spain.
