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Goldman Sachs might have some problems with the Fed's next stress test

Stephanie Yang   

Goldman Sachs might have some problems with the Fed's next stress test

On Thursday, all 31 U.S. banks passed the first round of the Federal Reserve's annual stress test, and one surprising bank has joined the ranks of potential weak links on Wall Street.

According to the New York Times Dealbook, Goldman Sachs' poor performance from Thursday's test has investors and analysts worried about its ability to pass the second part of the Fed's stress test. Goldman Sachs shares fell 1.7 percent on Friday following the test.

Among the 31 banks, Goldman Sachs fell at the lowest end of the spectrum with a 6.3 percent minimum tier 1 common ratio, compared to an 8.2 percent average. The tier 1 common ratio is a measure of a bank's ability to absorb losses during a crisis. The Fed also calculated that in the event of a stock market crash, the bank would lose $23.8 billion in trading alone.

According to the article, Goldman Sachs is the only big bank that analysts think will have problems during the next round. Failing the Fed's stress test would mean putting a stop to increasing dividends or buying back stock, on which the firm spent $5.5 billion in 2014.

Other banks that are being closely watched include Deutsche Bank and Citigroup, which was the only major bank to fail the test last year.

We'll find out on Wednesday whether Goldman Sachs (and the rest of Wall Street) makes the cut.

Read the full story at the New York Times »

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