WASHINGTON (MarketWatch) — The Federal Reserve is requiring 19 banks that underwent U.S.-mandated “stress tests” to now test their capital against a recession scenario in which the unemployment rate rises to 11%, according to a report Thursday.
The institutions went through the first stress tests in 2009, a time in the aftermath of the 2008 crisis when the financial system remained in fragile shape. In January, they submitted new capital plans to the Fed.
Nancy Bush, analyst at NAB Research, said that with an 11% jobless rate, it’s apparent that regulators don’t want to be “too optimistic, as they had been in 2009.” The government pegged the nation’s unemployment rate at 9% in January.
Louisiana State University- Baton Rouge finance professor Joe Mason said an 11% unemployment rate was “a reasonable scenario to test” and not so extreme.
“I see that as pretty darn likely,” Mason said.