Business

SunTrust: Don’t stress the stress test

March 14th, 2012

The Federal Reserve gave 18 big banks stress tests. SunTrust is one of the ones that didn’t meet the Fed’s requirements. However, the Atlanta-based bank says its account holders shouldn’t worry.

SunTrust declined WABE’s interview request. But, in an email, bank spokesman Michael McCoy said the test results have “no direct implications for our clients”. He also said the test did not reflect current conditions.

That was the whole point.

“It’s an extreme what if scenario,” said David Oliver of the Georgia Bankers Association.

What if unemployment soared to 13% next year? What if, two years from now, housing prices fell 20%? Oliver says the Federal Reserve asked those and other questions for a reason.

“They want to make sure the banks have enough money on hand to weather even the most severe situation,” said Oliver.

SunTrust says it’s still strong. But, because of the test results, the bank says it will not increase its return of capital to shareholders right now. Giving out more capital might look bad when the test is all about how much capital a bank has. SunTrust also said it expects to maintain its currently quarterly dividend and redeem certain trust preferred securities at the appropriate time.