The Federal Reserve’s annual stress test revealed that the largest U.S. banks have sufficient capital to endure severe economic and market turmoil, despite steeper hypothetical losses due to riskier portfolios. The test showed that 31 major banks would maintain capital levels above regulatory minimums even in extreme scenarios, with high-quality capital dipping to a low of 9.9%.
The results allow banks to announce capital plans, including stock buybacks and dividends, after markets close on Friday. However, the Fed noted higher losses were driven by shifts in bank portfolios, such as increased credit card balances and riskier corporate credit.
Banks tested would face a combined $685 billion in losses under severe conditions. Charles Schwab Corp posted the highest capital ratio at 25.2%, while some smaller regional lenders reported ratios below 7%. Major banks like JPMorgan Chase and Bank of America also showed strong capital ratios, ensuring continued resilience in potential economic downturns.
