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American banks pass their “stress tests” whilst European banks fail.

The stress test review, carried out by the Federal Reserve, is designed to gauge whether the biggest banks operating in the US have the “ability to lend to households and businesses even in times of stress”. In other words, to test how prepared they are for another global financial crisis.

All banks with more than $50bn (£33.5bn) in assets are subject to the annual examinations, which assess the corporations' ability to deal with "doomsday" scenarios, such as rising unemployment and plummeting house prices.

The 31 lenders tested this year - which together account for roughly 80% of the banking sector - were all deemed to have enough reserve cash to deal with a shock. Although some fared better than others. Citi Bank, who failed one of the tests last year, had been stuck paying a dividend of just a penny a share per quarter for the past few years. However, following news that they had passed the Fed's tests, they will buy back $7.8bn worth of shares - signalling long-anticipated paydays for investors.

The Fed didn’t place any conditions in passing Citigroup or 24 other firms, including Wells Fargo & Co. However, Bank of America Corp. got a conditional pass and has been asked to revise its financial plans due to "certain weaknesses", while Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley cleared after revising proposals, the Fed said Wednesday in a statement. U.S. units of Deutsche Bank AG and Banco Santander SA failed because of qualitative concerns about their processes.

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