US banks set to take a beating as oil prices tumble

they will cut the amount of money they set aside for bonuses this year.

On Thursday, with the market flat, financial stocks were among the weakest.

The industry is under pressure after lending billions to energy companies that are now grappling with falling oil prices and plummeting profits. A bet that the Federal Reserve would increase key interest rates several times this year – allowing the banks to increase their profit margins – is also turning bad. And investors have grown concerned that if weak economic growth overseas continues to weigh on European banks, the fallout could seep onto the balance sheets of their US counterparts.

It is Wall Street’s biggest challenge in years and a potential test of whether reforms put in place after the 2008 financial crisis are strong enough to withstand new market pressure. This comes as Wall Street has become a punching bag in this year’s presidential election. Democratic candidate Bernie Sanders often rallies his supporters with calls to break up the big banks.

“There is no doubt that the rise of populism in the presidential race is creating further market uncertainty,” activist investor Dan Loeb said.

This week, Neel Kashkari, who managed the $700 billion troubled asset relief programme used to rescue banks during the crisis, piled on. “The biggest banks are still too big to fail and continue to pose a significant risk to our economy,” Kashkari, who is now president of the Federal Reserve Bank of Minneapolis, said in a speech at the Brookings Institution. – Washington Post