The Downfall of Citigroup Bank and Others
http://www.economist.com/news/finance-and-economics/21599788-handful-banks-are-caught-short-feds-annual-stress-test-harsh-light

On March 26th the Federal Reserve released the results of its “comprehensive capital analysis and review.” This review highlights which of the country’s 30 largest banks potentially could increase their dividends and share buybacks. How well banks are doing financially is based off how quickly their return on capital is. Many banks were granted the go ahead of their finical plans. Citigroup and the American operations of HSBC, RBS Citizens and Santander plans were rejected by the federal reserve. It was a giant disappointment for share holders of Citi. According to the federal reserve Citi is unable to accurately evaluate risk and has poor management. This caused shares to fall 6% in after-market trading. Shortly after chief executive Michael Corbat stated, “We are deeply disappointed." Mr. Corbat was named chief executive after Citi had their first finical failure and may easily lose his title after this recent second financial failure.

The "comprehensive capital analysis and review " is made up of tests conducted by the federal reserve to determine financial health of banks. The first part of the test is based on numbers drawn from a hypothetical crisis such as a rapid drop in the stock-market, a drop in housing prices, and a sharp increase in unemployment. New parts of the test focus closely on operations of the banks. How well a bank is able to examine its own risk is highly correlated on how well the bank does financially. Another major part of the evaluation process is revenue projections. This data is important for financial planning but is squishy because it doesn't always mean anything. The results from the federal reserve evaluations usually have a large impact on what the bank needs to accomplish and what to pursue next.