What You Should Know About Banking Stress Tests

One of the results of the financial meltdown of 2008 was that banks will now be required to pass "stress tests," simulations of various difficult financial situations, administered by the Federal Reserve. In this video, Motley Fool financial analysts Morgan Housel and Matt Koppenheffer discuss how useful stress tests are, and tell us that the most important part of the process investors need to be watching is whether or not the Fed allows the bank being tested to return capital to its shareholders, through methods such as dividends or stock buybacks.

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The article What You Should Know About Banking Stress Tests originally appeared on Fool.com.

Matt Koppenheffer has no position in any stocks mentioned. Morgan Housel has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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