All 32 tested banks maintained capital above minimums despite a severe recession scenario, the Federal Reserve reported.
The Federal Reserve’s annual stress test revealed that the largest U.S. banks could withstand $708 billion in losses during a severe global recession while continuing to lend. The hypothetical scenario included a 10% unemployment spike, a 39% drop in commercial real estate prices, and a 30% decline in home values.
All 32 banks examined remained above minimum capital requirements, with the industry’s common equity tier 1 capital ratio declining by 1.6 percentage points. Projected losses included $200 billion from credit cards, $160 billion from commercial and industrial loans, and $75 billion from commercial real estate.
The Fed noted that stress test results will not immediately alter capital requirements, as regulators paused adjustments until 2027 to overhaul the methodology. This follows industry feedback and could reshape future capital rules.