What to expect from the bank stress tests

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on Wednesday, Feb. 12, 2020.
Andrew Harrer | Bloomberg | Getty Images

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The U.S. financial system was already hit by one global crisis this year, but investors will learn on Thursday whether the Federal Reserve believes the banks are prepared for more complications.

The Fed's "stress tests," which are designed to see how the financial structure of banks fare under adverse scenarios, include new pandemic-related scenarios this year. One of those is a W-shaped recovery, in which economic restrictions are reimposed to slow the coronavirus, shutting many businesses down once again. 

The first results of these exercises are slated to be released after the bell on Thursday. Weak performance could hurt the chances that the banks keep issuing their dividends, which several Fed officials have called for them to suspend.