Posted April 10, 2013 by Jessica Wright in Business

Bernanke states stress tests lead to stability of banks

Bernanke states stress tests lead to stability of banks
Bernanke states stress tests lead to stability of banks

Ben Bernanke, the Chairman of the Federal Reserve, announced today that he truly believes that the stress tests conducted on financial institutions are resulting in them becoming more resilient. Bernanke also stated that the rebound of the financial sector in the United States is positive and is expected to experience a broader recovery. This is definitely an improvement from the state of financial institutions during and after the economic crisis. “The economy is clearly a lot stronger than it was a couple of years ago.

Even if there are still some sectors that need improvement, there is no doubt that no one would have imagined this drastic improvement in such a short time,” he explained. He also explained that the benefits of the new monetary policy have been great so far. Many critics have previously argued that the stress tests conducted by the Federal government aren’t that harsh but banks have previously complained that they don’t fully comprehend the methodology of financial institutions.

The Federal government has previously released the scores and profit for important financial institutions to prove that their low capital ratios are going to decrease understand the new dividends proposed plans. However, Bernanke explained that providing these important details about banks’ methodologies will eventually lead to them curtailing in their own systems for risk-management. He also argued that most financial institutions in the United States have continued to bolster their profit by increasing their capital. This resulted in them depending on the federal government for loans most of the time.

He also explained that it essential that the scenarios for stress tests are going to continue remaining severe especially with the state of the economy improving right now. Keep in mind that the Federal government was previously criticized during the financial crisis for failing to recognize what was going to happen and becoming more lenient on financial institutions during that time.

Jessica Wright

Jessica Wright graduate of Northwestern University getting both Bachelor’s and Master’s Degrees in Broadcast Journalism. Jessica has been Senior Correspondent focusing on the impact of political decisions and office holders. Jessica is our seasoned investigative, political and community-oriented reporter and columnist whose work has won awards locally, statewide and nationally. Her awards have come from the National Federation of Professional Writers, the Ohio Newspaper Association, the Cleveland Press Club.