The Federal Reserve on Friday asked the largest U.S. banks to measure how they would fare in a global recession with a high jobless rate as the central bank outlined the terms for its 'stress test' of the largest U.S. lenders.
If banks do not prove that they can weather such a downturn, the Fed may freeze payouts to investors while the lenders boost capital reserves.
The largest 13 lenders must report their results to the Fed by April 5 with results announced by the end of June, the central bank said in a statement.
Another 21 large lenders must also answer to the Fed but on a narrower set of questions. Last year, the central bank said those smaller lenders would be exempted from tests of internal controls and planning.
The 'stress tests' were conceived in the 2010 Dodd Frank reform legislation meant to prevent a future financial meltdown like the one that followed the 2008 housing market collapse.