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The Stress Tests: Will the Big Banks Come Out Airtight or Full of Holes?

By David Hanson - Mar 20, 2014 at 2:40PM

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The big banking stress tests are just around the corner. Are the big banks prepared for another crisis? And could dividend increases be on the way for bank investors?

The results of the Fed's stress test are due to be announced today at 4, when investors will get to see just how prepared the big banks are in case of another major economic downturn. In this segment from Thursday's Where the Money Is, Motley Fool banking analyst David Hanson discusses how the stress tests work and the three scenarios that the banks will be tested on, and he also shines some light on the biggest risk for shareholders of a bank that performs poorly in the tests.

Stress tests are also a way for the big banks to prove that they have the ability to pay out higher dividends or initiate a share repurchasing program, without putting shareholders at risk. David discusses whether or not Bank of America ( BAC -2.27% ) could raise its famously low dividend after this round of tests, and when investors might see that change.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Citigroup Inc. Stock Quote
Citigroup Inc.
C
$62.76 (-1.65%) $-1.05
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$43.87 (-2.27%) $-1.02

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