Five of the nation’s biggest banks flunked their annual Federal Reserve stress tests for 2013. Citibank, the largest on the list, also came up short in 2012, and its back-to-back failures will prevent it from increasing shareholder dividends and moving ahead with share repurchases.
The failures are not quite so simple as failing to tuck reserves into the big bank equivalent of a mattress or rainy day fund. They illustrate that the Fed also holds bank management responsible for risk management and controls failures. For one bank, Utah-based Zions Bancorp, the Volcker rule, a Dodd-Frank Act requirement that places restrictions on proprietary trading, likely played a role.
