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Fed Stress Test: Banks Pass Even Under Severe Recession

6/30/2025

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Summary

Story summary

The Federal Reserve's stress test confirms large banks can endure a severe recession while meeting capital requirements.
The common equity tier 1 (CET1) capital ratio is expected to drop by 1.8 percentage points.
All 22 banks tested maintain CET1 levels above minimums after facing over $550 billion in hypothetical losses.
The scenario anticipates a global recession with major real estate price drops and increased unemployment.
The Fed aims to reduce model volatility by averaging stress test results over two years.

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Story summary

The Federal Reserve's stress test confirms large banks can endure a severe recession while meeting capital requirements.
The common equity tier 1 (CET1) capital ratio is expected to drop by 1.8 percentage points.
All 22 banks tested maintain CET1 levels above minimums after facing over $550 billion in hypothetical losses.
The scenario anticipates a global recession with major real estate price drops and increased unemployment.
The Fed aims to reduce model volatility by averaging stress test results over two years.