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Fed details stress test for big banks

Nov 16 2012 08:29 AP

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Washington - The Federal Reserve says the biggest banks in the US will be tested next year on their ability to survive not only a severe US recession but also a global downturn.

The latest round of "stress tests" will test how the banks would handle recessions in Europe and Japan and severe slowdowns in other Asian countries including China.

Under the Fed's most severe scenario, the United States would undergo a recession in which unemployment would reach nearly 12%, stocks would lose half their value and home prices would plunge 20%.

The nation's 19 biggest banks must submit reports on how they would fare under various scenarios. The central bank will release the results by late March.

The Fed has conducted stress tests of the banks every year since 2009.

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