All major US banks passed the Fed’s recession stress test – Kommersant

The US Federal Reserve System (FRS) yesterday, June 28, reported about conducting an annual stress test for 23 largest US banks. The Fed concluded that none of the largest banks would go bankrupt under the negative scenario, which implies a “severe recession”, and all would be able to maintain the minimum required level of capital adequacy. However, the total losses of banks would reach $541 billion.

As part of the stress test, the Fed is testing whether banks will have enough equity and other funds to cover significant losses that would arise in the event of a “severe recession”. This year, the Fed also tested how well the eight banks most heavily involved in trading stocks, bonds, etc. would survive a stock market panic.

According to the Fed, the stress test “demonstrated that large banks are well placed to weather a severe recession and continue lending to households and businesses even in the event of a severe recession.” In a stress test, the Fed tested a recession scenario with a 10% unemployment rate and a 38% to 40% decline in residential and commercial real estate values.

The Fed began conducting annual stress tests on major banks in the aftermath of the global financial crisis. This year, the stress test has received particularly close attention, as three medium-sized banks failed in the spring – Silicon Valley Bank, First Republic Bank and Signature Bank. 78% of the total losses in the event of a recession will be losses on bad loans. The level of loan losses in this case ranges from 1.3% for Charles Schwab to 14.7% for Capital One. Credit cards turned out to be the most problematic product – the projected losses on them in the event of a recession reach 17.4%, followed by loans for commercial real estate with 8.8%.

Yana Rozhdestvenskaya