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Federal Reserve officials invented a brand-new grade that allowed the two firms to avoid failing the test, in the form of the ‘conditional non-objection’. The banks will be allowed to maintain their capital distributions to shareholders at the levels of recent years, despite submitting plans that would have meant that their capital ratios would have fallen below required levels under stressed conditions.
Goldman chief executive Lloyd Blankfein and his counterpart at Morgan Stanley, James Gorman, were able to declare victory of a sort, their stock prices were barely affected and they should find it easier to achieve the return on equity targets that are a key driver of their own remuneration packages.
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