WASHINGTON (AP) — The Federal Reserve's annual "stress tests" of major U.S. banks have become better able to detect risks, Chairman Ben Bernanke said Monday night. He said the tests show that the banking industry has grown much healthier since the financial crisis.
Speaking in Atlanta, Bernanke noted that this year's tests showed that 18 of the biggest banks had collectively doubled the cushions they hold against losses since the first tests were run in 2009. He says the tests are providing vital information to regulators.
The latest test results were released last month. They showed that all but one of the 18 banks were better prepared to withstand a severe U.S. recession and an upheaval in financial markets. The tests are used to determine whether the banks can increase dividends or repurchase shares.
Bernanke's comments came in a speech to a financial markets conference sponsored by the Federal Reserve Bank of Atlanta. He said he viewed the first stress test conducted in 2009, months after the financial crisis struck, as "one of the critical turning points in the crisis."
"It provided anxious investors with something they craved: credible information about prospective losses at banks," he said.
Bernanke said that in the ensuing years, the Fed has worked to improve the stress tests so they could serve as a resource for banking regulators to monitor and detect threats to the financial system.
During a question period after the speech, Bernanke was asked what kept him up at night.
"Let me assure you, there are no major problems you haven't heard about," he said in response. He said his list of concerns include whether the recovery will gain momentum and when the country will get back to full employment.
He said the economic situation in Europe also remains complex, as that region struggles to deal with its debt crisis. He said in the United States, a major issue remains how to deal with high budget deficits without compromising the economic recovery.