Jun. 24 at 8:16 PM
$BAC $JPM $C $GS $WFC
Fed says stress test confirms large banks 'well positioned' for severe recession
The results of the Federal Reserve Board's annual bank stress test confirmed that large banks are well positioned to weather a severe recession and able to continue to lend to households and businesses, the regulator announced. Despite absorbing more than
$708B in total loan losses under this year's hypothetical scenario, capital declined only 1.6 percentage points in aggregate, staying above minimum capital requirements, the Fed stated. As the Board previously announced, today's results will not impact large bank capital requirements, which have been published today. The current capital requirements will stay in place until 2027, when the stress test will be run with loss-estimating models that take public feedback into consideration. All 32 banks tested remained above their minimum common equity tier 1 capital requirements during this year's hypothetical recession scenario, which was similar in severity to the prior test.
The hypothetical scenario this year included a severe global recession with a 39 percent decline in commercial real estate prices and a 30 percent decline in house prices. The unemployment rate also increased to a peak of 10 percent, and economic output declined commensurately. "Today's results underscore the strength of the banking system," Vice Chair for Supervision Michelle W. Bowman said. "As we work to increase the transparency and accountability of the stress test, public feedback will help us continue to improve and instill greater confidence in the stress test and its results." Publicly traded large cap banks include Bank of America (BAC), Citi (C), Goldman Sachs (GS), JPMorgan (JPM), Morgan Stanley (MS), U.S. Bancorp (USB) and Wells Fargo (WFC).
