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The ability of the largest US banks to withstand a severe economic downturn will be in focus this week as the Federal Reserve publishes the results of the industry’s annual stress tests, amid growing fears of a recession.
The test, which runs through a series of doomsday scenarios for 34 banks including Goldman Sachs and JPMorgan Chase, is a crucial gauge of financial strength and helps determine how much capital lenders will be able to put towards dividends or share buybacks.
US subsidiaries of foreign banks with significant American investment banking operations are also subject to the Fed stress test. Industry observers are paying particular attention to Credit Suisse, which was put on a watchlist of institutions requiring tougher supervision by the UK financial regulator, the…