Federal Reserve Says All 34 Big Banks Passed ‘Stress Test’

(CN) - For the  first time in seven years of annual stress tests, all 34 of the nation's biggest banks have received Federal Reserve approval for their capital plans.

The Fed announced the results of its second round of stress tests for 2017 late Wednesday. All of the banks scrutinized have assets of at least $50 billion.

As a result, all of the banks, including the nation's four largest -- JPMorgan Chase, Bank of America, Citigroup and Wells Fargo -- can now raise dividends or repurchase their shares.

Capital One's plan only got conditional approval and it has six months to revise it. But the bank was still allowed to return profits to shareholders.

The Feds' latest analysis tested the banks to determine if their current plans for paying out capital to shareholders would still allow them to keep lending if hit by another financial crisis and severe recession.

With the 34 banks holding more than three-quarters of total assets of all U.S. financial companies, the results showed strength in an industry that nearly toppled the financial system — and has recovered handily nearly nine years on from the 2008-09 crisis.

The banks have a total of about $1.2 trillion in capital reserves as of the fourth quarter of last year, an increase of $750 billion over the beginning of 2009, in the depths of the crisis, the Federal Reserve said.

They are expected to pay out to shareholders nearly 100 percent of their net revenue over the next four quarters, compared with 65 percent in the same period last year.

In a statement, Fed Gov. Jerome Powell said the annual  assessment of banks' capital "has motivated all of the largest banks to achieve healthy capital levels, and most to substantially improve their capital planning processes."

Earlier this week, Federal Reserve Chair Janet Yellen told a British audience she believes banking regulators have made enough improvements to the financial system that the world will not experience another financial crisis "in our lifetimes."

Addressing an audience at the British Academy in London on Tuesday, Yellen said the banking reforms put in place in recent years have made the financial system much safer. She said regulators are doing a better job of watching for the type of systemic risks that struck the global economy in 2008, bringing on the worst global downturn in seven decades.

"Would I say there will never, ever be another financial crisis?" Yellen said, repeating a question from the audience. "You know probably that would be going too far, but I do think we are much safer, and I hope that it will not be in our lifetimes and I don't believe it will be."

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