Finance

Bank stocks pop after Fed releases ‘easier’ 2025 stress test

Published

4 months ago

February 6, 2025

Jane Fraser, CEO of Citi, speaks during the Milken Institute Global Conference in Beverly Hills, California, on May 1, 2023.

Patrick T. Fallon | AFP | Getty Images

Bank shares rose Thursday after the Federal Reserve released parameters for its annual industry stress test showing smaller hypothetical shocks to the U.S. economy than in previous years.

While still challenging, with U.S. joblessness jumping to 10% and a 33% drop in home prices, the 2025 exam has smaller spikes in unemployment and smaller declines in stock and real estate values than previous versions, Jason Goldberg of Barclays said Thursday in a note titled “2025 Stress Test: Scenarios Easier than Past Two Years.”

The Fed will soon take steps to “reduce the volatility of stress test results and begin to improve model transparency” in the 2025 exam, the regulator said in a statement released Wednesday after the close of regular trading.

Shares of Citigroup jumped 2.9% in midday trading, while Goldman Sachs, Morgan Stanley and Bank of America each rose at least 1.5%. Big banks gained more than smaller lenders, with the KBW Bank Index rising 1.2% compared with the 0.9% gain of the S&P Regional Banking ETF.

The stress test changes bolster the case made by Wall Street analysts that big U.S. banks will face a friendlier regulatory regime under the Trump administration. Since the aftermath of the 2008 financial crisis, the biggest U.S. banks have had to undergo annual exams that test their ability to withstand a severe recession while continuing to lend to consumers and businesses.

Banks have complained for years that the annual stress tests were opaque and unfairly administered, and industry trade groups sued the Fed in December over the exam.

By making the latest iteration of the test both less challenging and more predictable, banks could hold smaller capital cushions later this year, according to Bank of America analyst Ebrahim Poonawala.

“The 2025 stress test scenario, broadly better vs last year, increases our confidence that banks should begin to see relief on regulatory capital requirements, given our expectations for a shift to a balanced, transparent, and more predictable regulatory regime,” Poonawala wrote Thursday in a note.

Finance

CVX, UAL, NOC, RH and more

Published

2 hours ago

June 13, 2025

Business Finance News

Finance

Trump CFPB cuts reviewed by Fed inspector general

Published

22 hours ago

June 12, 2025

Business Finance News

Director of the Office of Management and Budget (OMB) Russell Vought attends a cabinet meeting at the White House in Washington, D.C., U.S., April 10, 2025.

Nathan Howard | Reuters

The Federal Reserve’s inspector general is reviewing the Trump administration’s attempts to lay off nearly all Consumer Financial Protection Bureau employees and cancel the agency’s contracts, CNBC has learned.

The inspector general’s office told Sen. Elizabeth Warren, D-Mass., and Sen. Andy Kim, D-N.J., that it was taking up their request to investigate the moves of the consumer agency’s new leadership, according to a June 6 letter seen by CNBC.

“We had already initiated work to review workforce reductions at the CFPB” in response to an earlier request from lawmakers, acting Inspector General Fred Gibson said in the letter. “We are expanding that work to include the CFPB’s canceled contracts.”

The letter confirms that key oversight arms of the U.S. government are now examining the whirlwind of activity at the bureau after Trump’s acting CFPB head Russell Vought took over in February. Vought told employees to halt work, while he and operatives from Elon Musk‘s Department of Government Efficiency sought to lay off most of the agency’s staff and end contracts with external providers.

That prompted Warren and Kim to ask the Fed inspector general and the Government Accountability Office to review the legality of Vought’s actions and the extent to which they hindered the CFPB’s mission. The GAO told the lawmakers in April that it would examine the matter.

“As Trump dismantles vital public services, an independent OIG investigation is essential to understand the damage done by this administration at the CFPB and ensure it can still fulfill its mandate to work on the people’s behalf and hold companies who try to cheat and scam them accountable,” Kim told CNBC in a statement.

The Fed IG office serves as an independent watchdog over both the Fed and the CFPB, and has the power to examine agency records, issue subpoenas and interview personnel. It can also refer criminal matters to the Department of Justice.

Soon after his inauguration, Trump fired more than 17 inspectors general across federal agencies. Spared in that purge was Michael Horowitz, the IG for the Justice Department since 2012, who this month was named the incoming watchdog for the Fed and CFPB.

Horowitz, who begins in his new role at the end of this month, was reportedly praised by Trump supporters for uncovering problems with the FBI’s handling of its probe into Trump’s 2016 campaign.

Meanwhile, the fate of the CFPB hinges on a looming decision from a federal appeals court. Judges temporarily halted Vought’s efforts to lay off employees, but are now considering the Trump administration’s appeal over its plans for the agency.