Federal Reserve Board Vice Chair for Supervision Michael Barr testifies before a House Financial Services Committee hearing on the response to the bank failures of Silicon Valley Bank and Signature Bank, on Capitol Hill in Washington, D.C., on March 29, 2023.<\/p>\n
Kevin Lamarque | Reuters<\/p>\n<\/div>\n<\/div>\n<\/div>\n
The Federal Reserve<\/a> said Wednesday that the biggest banks operating in the U.S. would be able to withstand a severe recession scenario while maintaining their ability to lend to consumers and corporations.<\/p>\n Each of the 31 banks in this year’s regulatory exercise cleared the hurdle of being able to absorb losses while maintaining more than the minimum required capital levels, the Fed said in a statement.<\/p>\n The stress test assumed that unemployment surges to 10%, commercial real estate values plunge 40% and housing prices fall 36%.<\/p>\n “This year’s results show that under our stress scenario, large banks would take nearly $685 billion in total hypothetical losses, yet still have considerably more capital than their minimum common equity requirements,” said Michael Barr<\/a>, the Fed’s vice chair for supervision. “This is good news and underscores the usefulness of the extra capital that banks have built in recent years.”<\/p>\n The Fed’s stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends. This year’s version included giants such as JPMorgan Chase<\/a><\/span><\/span><\/span> and Goldman Sachs<\/a><\/span><\/span><\/span>, credit card companies including American Express<\/a><\/span><\/span><\/span> and regional lenders such as Truist<\/a><\/span><\/span><\/span>.<\/p>\n