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March 8, 2013

Banks Pass Fed’s Tests; Critics Say It Was Easy

Four years after the financial crisis, federal regulators said that many of the nation’s largest banks were better prepared to sustain future market shocks, paving the way for the healthiest institutions to increase their dividends and buy back shares.

The results of so-called stress tests, released on Thursday by the Federal Reserve, indicate that most large banks would survive a severe recession and a crash in the markets. The tests, which measured a bank’s capital levels during adverse conditions, help validate the government’s efforts to shore up the financial systems.

But some analysts contend that the Fed was still too lenient with the banks. The stress tests, they argue, underestimate potential losses and the effects of several major financial firms collapsing, which can paralyze the entire system.”

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