US banks ‘can pass stress tests’

<p>The Federal Reserve stated most banks would pass the tests.</p>

Stress tests would be passed by the majority of the banks in the US, according to a statement released by the country's Federal Reserve.

Government-controlled Ally Financial, the rescued former finance arm of General Motors, was the only one of the 18 banks to fail, according to the body.

Wall Street banks Morgan Stanley – which was rated at 5.7 per cent – and Goldman Sachs, at 5.8 per cent, were shown to be the next two lowest.

"The nation's largest bank holding companies have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis," the US central bank said in a statement.

Federal Reserve governor Daniel Tarullo explained the stress tests are needed in order to gauge the health of companies in the financial services sector.

Earlier this month, chairman of the US Federal Reserve Ben Bernanke defended the central bank's monetary stimulus, which led to the Forex Gold Index rising by 0.7 per cent to $1608.50 per ounce.

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