New York Community Bancorp, Inc., one of America's largest banks, can withstand a severe economic downturn. The results of the Dodd-Frank Act Stress Test show, that the bank would be able to exceed the regulatory minimum capital ratios, even if it suffered severe credit losses.
Every bank has to get through the Fed's annual “Dodd-Frank Act Stress Test” (DFAST) in order to provide proof of its financial health. Yesterday, June 17, New York Community Bancorp, Inc. disclosed its DFAST results.
The bank had to pass the test under the Severely Adverse Scenario, a macroeconomic scenario, which was established by the Board of Governors of the Federal Reserve System (FRB) in 2014. The planning horizon of the scenario were nine quarters, from September 30, 2014 to December 31, 2016. Additional information about the FRB's stress test scenarios can be found on their website.
The DFAST included the New York Community Bank (NYCB) as well, which is a savings bank subsidiary of New York Community Bancorp, Inc. Regulators took a detailed look at the company's estimates of losses, pre-provision net revenue, net income, capital levels and provisions for loan and lease losses.
New York Community Bancorp, Inc. Passed DFAST successfully
The results of the DFAST indicate, that the bank would have the financial resources needed to withstand the economic downturn simulated in the Severely Adverse Scenario. Moreover, it would be able to maintain capital levels that exceed the minimum regulatory requirements. That would be the case for both, New York Community Bancorp, Inc. as well as its subsidiary New York Community Bank.
The bank would suffer severe credit losses under the Severely Adverse Scenario, which is especially due to its activities in New York's real estate markets. Obviously, these credit losses would impact the bank's capital as well as its net income.
Moreover, the bank's risk-weighted assets were forecasted to increase during the economic downturn, which would result in decreasing capital ratios.
However, New York Community Bankcorp, Inc. could maintain a Common Equity Tier 1 Risk-based Capital Ratio of 8.88% at the end of the scenario, which is significantly higher than the benchmark of 4.5% under Basel III. All other regulatory capital ratios remained above the minimum requirements as well.
New York Bankcorp, Inc. is one of America's largest, locally focused banks
New York Bancorp, Inc. is one of the 25 largest U.S. bank holding companies. It published total assets of $48.3 billion in Q1 2015 and had a Market Capitalization of $8.13 billion on June 17, 2015.
The bank offers a full range of traditional and non-traditional financial products and services, but focuses on multi-family loans, commercial real estate and construction loans, primarily in the New York metropolitan area. A series of 11 acquisitions underlines the bank's dominant role in the region.
Its subsidiary, the New York Community Bank, has 242 branches, mostly in and around New York City. Furthermore, New York Bankcorp, Inc. has a second subsidiary, the New York Commercial Bank, which operates 30 branches in the New York metropolitan area.
In 2014, 29 out of 30 American banks passed the DFAST. New York Bancorp, Inc. was successful once again in 2015. That doesn't necessarily mean that the bank is doing great. However, it means the bank is healthy enough to survive an economic crisis that is more severe than the Great Recession between 2007 and 2009.
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