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ERROR: type should be string, got "https://www.barrons.com/articles/fed-releases-its-second-round-of-stress-tests-what-that-means-for-banks-51600464526\nFed Releases Its Second Round of Stress Tests. What That Means for Banks.\nCarleton English\nSteveheap/Dreamstime\nBank investors were dealt another dose of uncertainty even as analysts remain cautiously bullish on the sector.\nLate Thursday the Federal Reserve unveiled scenarios for the second round of stress tests the nation’s largest banks will have to undergo before year-end. It’s the first time since the tests were instituted that the banks will have to submit their capital plans twice in one year—a decision by the Fed that reflects economic uncertainty amid the coronavirus pandemic.\nThe banks generally fared well in the first round of stress tests, results revealed in June showed. The second round of tests features two hypothetical economic scenarios that even the Fed acknowledged are “significantly more severe” than most baseline projections for the path of the economic recovery. For example, the “severely adverse” scenario has the unemployment rate standing at 12.5% at the end of 2021 and retreating to 7.5% at the end of the scenario. The current unemployment rate is 8.4%. The Fed will post results for the individual banks before year end.\nIn addition to the next wave of stress tests, the Fed also said it would decide by the end of the month if it would still require banks to halt buybacks and cap dividends based on recent earnings.\nWhile it was known that the banks would have to resubmit their capital plans this year, the unveiling of the scenarios coupled with the uncertainty around capital return was just another reminder of the headwinds facing the sector. Analysts expect that buybacks will continue to be halted, given the Fed’s cautious stance.\n“Given the Fed’s concerns about downside risks to the economy, we believe the Fed will use the results to further limit share repurchase in 2021, but we also believe that this is factored into investors’ expectations currently,” Brian Kleinhanzl, managing director at Keefe, Bruyette & Woods, wrote in a note Friday.\nThe KBW Bank Index fell nearly 0.6% Friday.\nEven with the extra dose of near-term uncertainty, analysts still think banks, which have yet to fully recover from the March selloff, are an opportunity.\n“Buy any weakness, [the] risk/reward for [is] banks attractive,” David George, senior research analyst at Baird, wrote in a note following the Fed’s release of the new scenarios in which he urged investors to “stay grounded in reality.”\nGeorge made similar remarks following the release of the first round of stress test results in June. Since then, the KBW Bank Index is up roughly 7% while the S&P 500 has gained 11.5%.\nHe went on to note that economic data has improved and management presentations at recent conferences signaled that even though net interest income will decline in an era of lower for longer interest rates, a jump in fee income should offset some of that drop.\nSo far, investors haven’t been willing to take the chance.\nWrite to Carleton English at carleton.english@dowjones.com"