Fed Unveils Doomsday Scenario for Banks

CNBC.com and wires
Monday, 12 Mar 2012 | 5:37 PM ET

The Federal Reservereleased its "worst-case scenario" bank stress test criteria Monday and said it will release full results Thursday at 4:30 p.m. ET.

The Fed will look at how the nation's 19 largest banks would survive a world with a 13 percent jobless rate, a 50-percent drop in stocks, a 21-percent decline in housing prices and a significant contraction of other major world economies.

The Fed conducts the tests on banks every year, but this is the first time since 2009 that it will release its results to the public. In 2009 the Fed found billions in insufficient funds on bank balance sheets.

The tests are designed to make sure banks have enough cash and cash-like securities to withstand catastrophic losses in a financial crisis.

Federal Reserve Stress Test Outline
CNBC's Eamon Javers has details on the Federal Reserve's stress test methodology, including some of the scenarios they're using. The stress test results will be released at 4:30pm on Thursday.

The Fed wants banks to be strong enough to keep lending money to Americans and businesses.

The Fed can stop banks from paying stock dividends or buying back their own stock if they fail the test.

The Associated Press contributed to this report.