The Federal Reserve said all firms stayed above minimum capital requirements even under a severe recession scenario featuring a 39% commercial real estate price drop and 10% peak unemployment.
All 32 large banks in the Federal Reserve’s annual stress test remained above minimum capital requirements while absorbing more than $708 billion in projected loan losses. The scenario modeled a hypothetical severe recession, including a 39% decline in commercial real estate prices and peak unemployment of 10%, yet aggregate capital declined only 1.6%. Bank stress tests are designed to gauge whether major lenders can keep lending through sharp economic shocks while staying adequately capitalized.