The Federal Reserve recently conducted stress tests on the largest US banks and found that they could withstand severe economic conditions, including a spike in inflation, plummet in dollar value, and collapse of their biggest clients. The results were welcomed by the banking industry as they have opposed international efforts to raise capital requirements. However, some critics argue that the stress tests are not challenging enough and do not adequately prepare banks for all possible scenarios.
In addition to these findings, it was reported that Lufthansa will introduce an 'environmental-cost surcharge' on flights departing from the EU, Britain, Norway and Switzerland after December 31st to help cover the cost of complying with a European rule requiring at least 2% of airlines fuel consumption to come from sustainable aviation fuel. This news comes as America's biggest banks are facing higher losses in a severe recession compared to last year due to increased risk and expenses, particularly in the area of credit card debt.
The Federal Reserve's stress tests assessed how banks would cope with extreme economic conditions, including a severe spike in inflation, plummet in dollar value, and collapse of their biggest clients. The largest US lenders passed the higher bars set by the Fed and held enough capital to ensure stability and provide a financial cushion against losses.
The industry's performance was likely to be welcomed by Wall Street's largest banks who have opposed an international effort to raise their capital requirements, which they argue will crimp their ability to lend and ultimately raise costs on consumers. However, some critics argue that the stress tests are not challenging enough and do not adequately prepare banks for all possible scenarios.
Separately, Lufthansa announced that it would pass on the cost of complying with new emissions regulations to passengers by introducing an 'environmental-cost surcharge' on flights departing from the EU, Britain, Norway and Switzerland after December 31st. The German airline said this was to help cover a European rule ensuring that at least 2% of airlines fuel consumption comes from more-expensive sustainable aviation fuel.
The largest US banks are facing higher losses in a severe recession compared to last year due to increased risk and expenses, particularly in the area of credit card debt. Credit card debt recently hit a record high and late payments are increasing, leading to higher projected credit card losses for banks. Despite this, all banks passed the Fed's stress tests with sufficient capital ratios.
This article appeared in multiple sources including The Economist, The New York Times and CNN.
