1. Ally Bank Fails Stress Test
Ally Financial Inc. is the only bank with failed stress test ratios. Last month, Federal Reserve results
were released of 18 of the largest financial institutions which came out “recession proof”. The initial
phase one of a two phase stress test is to test big banks on their resiliency outcomes such as 2008’s Credit
Crisis. Ally stated in a recent announcement showing its defiance towards the Federal Reserve’s stress
test results, “Ally Financial continues to disagree with the Federal Reserve's assumptions and modeled
results."
Ally Bank is still a government owned bank. The big banks stress test showed Ally Bank had a 1.5% in
capital which measured against the tests Tier 1 common ratio. The number ratio is well below accepted
standard of 5%. According to CNBC, “ Ally's inability to pass the test could pose another roadblock
to the U.S. Treasury's plan to eventually sell its 73.8 percent stake in the bank. Ally was saved by the
government in 2009 with a $17.2 billion dollar bailout.”
17 other banking institutions were also included in the test. There were recession challenges that were
discovered such as in the areas of mortgage, securities and loan losses.
Many other problem areas were identified in Ally Bank’s failed stress test. Ally's mulligan Tier 1
common ratio fell to 1.52 percent. With its Tier 1 common ratio, a 1.78 percent ratio was also resulted
below the Federal Reserve minimum in reference to lose of equity. Ally is however, allowed to and
will re-submit its capital plan. Ally Holdings is also still associated with ResCap. ResCap is in relation
to bankruptcy and is the subprime mortgage unit of GMAC Finance (Former name of All.) The
government’s plans to sell U.S. Treasury to Ally looks even less optimistic.