When it comes to financial economic growth, banks must be put to the test for a hypothetical scenario in times of economic crisis for the government to realize the amount of capital needed by a specific bank to be considered “healthy.”
When it came to the Federal Reserve stress tests’ result, the major banks flew with success for being able to leverage issues during an economic crisis. However, unlike its competitors, Bank of America held back in changing its dividend until recently.
The reason for holding back is different results, Bank of America’s own stress test on itself showed a poor result compared to the fed’s stress test. Prompting them to ask for clarification from the Federal Reserve.
Similarly Citigroup also made a similar comment to BoA, but they were assured that the stress test results were different, but it mattered more to learn the difference between the two results.
How Bank of America Dealt With It
The official fed test results showed just how resilient these major bankings are even during inflation and other financial crises. For Bank of America, they increased their dividend by 9%.
These kinds of stress tests are also important for the life of American citizens, under the Dodd-Frank Act, it requires protection for families and households to avoid being exploited through financial means by banks and other financial establishments.
This act prevented banks from misusing their customer’s income and illegally using it for their own benefit. Banks can make investments on behalf of their client, and prevent customers from falling victim to identity theft and simplify loaning.
Given the landscape of the current world, it’s important to test the corporations behind major fundings once the economy starts showing signs of a crisis. It’s better to keep updated to ensure secure stability to help those in need at such desperate times to assure them.