Now that the highly anticipated results of the stress tests are finally out, what kind of service changes can you expect from your bank? It might be alarming to hear your bank needs to raise billions of dollars in a short time. But you probably won’t see any major changes in day-to-day services regardless of how your bank performed.
Questions you might have about how the stress tests might affect your banking experience:
Q: Is there any reason I should switch banks if mine was determined to need more capital?
A: The stress-test results don’t have any bearing on ordinary deposit accounts, which are insured by the Federal Deposit Insurance Corp.One possibility to consider is that your bank could sell off one of its units. Even if that happened, the accounts with the unit would remain FDIC-insured — any changes you’d see would boil down to customer service.
Q: What if I’m looking to open a savings account, certificate of deposit or money-market account? Will the best rates come from the healthier banks or the less- healthy ones?
A: In theory, a bank could raise cash by offering more competitive interest rates and attracting greater deposits. But the boost wouldn’t be big or fast enough to meet the demands of the stress tests. One area where customers might get a break is with loans, said Brian Bethune, an economist with Global Insight. The banks deemed healthy will probably be able to get lower interest rates on wholesale loans, including mortgages and small-business loans, and pass them down to consumers.
Q: Let’s say the stress test determined my bank needs to raise a lot of capital. Should I brace myself for interest-rate hikes on my credit card?
A: It’s very possible you could see rates and fees go up, but that’s nothing new these days. As such, you should already be keeping a sharp eye on your credit-card statements.
Q: If I’m an investor, what will happen to my stock?
A: Banks might raise capital by converting private preferred stock to common stock. If you hold any common stock in the bank, this could dilute the value of your shares and dividends. If you’re a holder of a preferred stock, which gives you greater rights to the company’s assets, you shouldn’t see any change.
Q: Is there any impact at all on my accounts?
A: The idea behind the stress tests was to restore confidence in the nation’s banking system, which regulators see as key to rehabilitating the economy. In turn, consumers would see improved interest rates and credit availability. The question, of course, is how investors react to the stress-test results and how the banking industry fares in coming months.
