The Federal Reserve To Conduct Stress Tests Assuming 12% Unemployment

The Federal Reserve has asked top 30 banks in the United States to make sure that they have enough buffering capital to withstand the worst economic conditions. The Fed laid out three scenarios banks have to test against, and asked lenders to submit their detailed capital plans by January 7, 2013.

The Federal Reserve made it clear that they are not making any economic forecasts. The central bank is putting hypothetical “severely adverse scenarios” to assess the strength of the country’s financial institutions. The Fed started stress tests during the 2009 economic crisis to restore confidence in financial institutions, after Lehman Brothers Holdings Inc. (PINK:LEHMQ) and Bear Stearns collapsed.