EddieJayonCrypto
27 Jun 24
The Federal Reserve conducted its yearly stress test on 31 of the largest US banks, subjecting them to a simulation involving significant credit and market losses. Despite the severe scenario, the Fed concluded that all banks have enough capital to withstand the financial impact. However, it noted i...
The Federal Reserve recently conducted its annual stress test on 31 of the largest US banks. This test involved subjecting the banks to a simulation involving significant credit and market losses. Despite the severity of the scenario, the Fed concluded that all banks have enough capital to withstand the financial impact.
However, the Fed noted increased risk in the banks' balance sheets due to higher credit card balances, tighter lending margins, and riskier corporate credit portfolios. The two-year simulation tested a scenario where the stock market tumbles 55%, commercial real estate prices drop 40%, and unemployment hits 10%. This resulted in higher losses due to riskier bank balance sheets and higher expenses.
Notably, the test did not include New York Community Bancorp, currently the 33rd largest US bank. The 31 banks that were part of the test include JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley.