How safe do US banks feel?
The financials of the biggest look good; there is more capital underpinning the system than before the crisis; stress tests are now into their eighth year and bank CEOs tell analysts and shareholders that all the tiresome scenarios they must work through are making the system ever safer. And so they would.
But looking at the latest round of stress-test results and listening to the latest round of quarterly results conference calls, you might be forgiven for feeling a twinge of unease.
There is a palpable change in tone, a new confidence that the more annoying regulatory proposals will inevitably be watered down once authorities have taken on board the good sense fed back to them in comment periods.
The Federal Reserve has just allowed Goldman Sachs, Morgan Stanley and State Street – all three of which failed to hit minimum capital levels in the most recent stress tests – not only to reach compliant levels organically rather than having to go to market, but even to continue payouts to shareholders.
Meanwhile, the stress capital buffer (SCB) – originally mooted in late 2016 and still tentatively scheduled to be brought in by the end of 2019 – looks ever more likely to be watered down.