The big banks pass all the less vigorous federal reserve stress tests

All the big banks have passed Federal reserveThe annual “stress tests” of the financial system, the central bank said on Friday, but the test carried out by the Central Bank was notably less vigorous than it had been in previous years.

The 22 banks tested this year would have remained solvent and above the minimum thresholds to continue to operate, said the Fed, despite the absorption of around $ 550 billion in theoretical losses. In the Fed scenario, there would be less increase in unemployment, less than a severe economic contraction, less drop in commercial real estate prices, less than a drop in housing prices, among other measures compared to what they tested in 2024.

All these less harmful, but simulated drops mean that there would be less damage to the balance sheets of these banks and less risks of these banks of failure potentially. Since the banks succeeded in the 2024 tests, it was planned that the banks will succeed in the 2025 tests.

“Large banks remain well capitalized and resistant to a range of serious results,” said Michelle Bowman, vice-president of the Bank supervision, in a statement. A named of President Donald TrumpBowman became the vice-president of the Fed supervision at the beginning of the month.

It is not clear why the Fed has chosen to go with a less vigorous test this year. In a statement, the bank said that previous tests had shown “involuntary volatility” in the results and that it planned to request public comments and industry to adjust stress tests in the coming years. The Fed has also chosen not to test the banks also strongly on their exposure to investment capital assets, arguing that investive capital assets are generally held in the long term and are generally not sold in terms of distress.

The Fed also tested any banking exposure to a private credit, an asset class of 2 dollars who, even the researchers, the researchers themselves observed more and more quickly. The Federal Reserve Bank of Boston recently stressed that Private credit could be a systemic risk for the financial system In a severe unfavorable scenario, which is exactly what constraint tests are supposed to test.

There was no wording or phrasing in the Fed press release, reports or methodology on the test or private credit measurement in this year’s test.

The Fed stress tests were created after the 2008 financial crisis as a way to assess whether the banks “too big to fail” in the country could resist another financial crisis like the one that occurred almost 20 years ago. The tests are indeed an academic exercise, where the Fed simulates a scenario in the world economy and measures what this scenario would do with bank balance sheets.

The 22 banks tested are the biggest names in the company, as JPMorgan Chase,, Citigroup,, America Bank,, Morgan Stanley And Goldman Sachswho hold hundreds of billions of dollars in assets and have large companies that affect each part of the American and world economy.

As part of the hypothetical scenario of this year, a major global recession would have resulted in a 30% drop in commercial real estate prices and a 33% drop in housing prices. The unemployment rate would increase to 10% and equity prices would drop by 50%. In 2024, the hypothetical scenario was a 40% drop in commercial real estate prices, a 55% drop in stock prices and a 36% drop in housing prices.

With their passage notes, the main banks will be authorized to issue dividends to shareholders and buy stocks to return the product to investors. These dividend plans will be announced next week.