Stress test results: most banks fine, Goldman struggles

It's not a problem though, says the bank.

Bank stress tests have come round again - and almost all banks are fine. 

Is this a surprise? What actually goes on in a stress test? Well basically, the FED pitches banks against hypothetical economic scenarios, seeing whether they'd stand up to them - which is really testing whether they have a sufficient cushion of capital in the case of "deep global recession". So stress tests are an attempt to safeguard against another 2008 scenario. But now, a few years on from the crisis, the tests are more being used as a gateway for bank payouts. Of the 18 tested, only one failed - (Ally), and for the 17 that passed the tests will pave the way for increased dividends and share buybacks.

Interesting weaknesses showed up in the case of Goldman Sachs - which finished third from last.

Here's the FT:

Goldman, normally renowned for its resilience, would suffer a $20bn loss in the depths of the hypothetical crisis and its ratio of core “tier one common equity” capital against risk-weighted assets would fall to 5.8 per cent, compared with a minimum requirement of 5 per cent, the Fed said.

..but the bank doesn't think this will be much of a problem:

Howard Chen, bank analyst at Credit Suisse told the FT: “Importantly, we do not believe this negatively impacts our capital return assumptions."

Aside from the test results themselves banks had another concern: whether other banks would jump the gun and announce plans for payouts to shareholders early, like JP Morgan did last year. Some called it a prisoner's dilemma scenario - if one bank goes, they all do. But the Fed asked banks not to make public their plans before next week's announcement.

Here's the chart - also available here, amongst other details.


Goldman Sachs building. Photograph: Getty Images.
Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.