All major banks adopted the annual “stress tests” of the Federal Reserve for the financial system, the central bank announced on Friday, but the test carried out by the central bank was particularly less strong than in previous years.
All 22 banks tested this year would have remained solvent and over the minimum swell that should continue to be operated, said the Fed, although they had absorbed theoretical losses of around 550 billion dollars. In the scenario of the FED, it would be less attributable to an unemployment increase, less of a serious economic contraction, less than a decline in commercial property prices, less than a decline in real estate prices, among other metrics compared to what they tested in 2024.
All of these less harmful but simulated waste means that the balance sheet balance sheets of these banks would harm less and potentially fail the risk of these banks. Since the banks passed the 2024 tests, the banks were expected to pass the 2025 tests.
“Large banks are still well capitalized and resistant to a number of serious results,” said Michelle Bowman, deputy chairman of the bank for the supervision. As the appointment of President Trump, Bowman became the deputy chairman of the FED at the beginning of this month.
The FED said it went with a less strong test because the global economy had weakened since last year and the test tends to weaken. In addition, the bank said that earlier tests had shown an “unintentional volatility” in the results and plans to look for public and cross -sector comments to adapt stress tests in the future years. The FED also decided not to test the banks so much for their exposure to private equity assets, and argue that private equity assets are usually kept long -term and are generally not sold in times of need.
The Fed also tested no bank loan, a 2 -brillion class of 2 trillion US dollars Fed researchers themselves have observed that they grow alarming quickly. Boston’s Federal Reserve Bank recently pointed out this Private loan could be a systemic risk of the financial system Under a serious sub -scenario on which the stress tests are supposed to test exactly that.
The press release, reports or methodology of the Fed on testing or measuring private loans or private debts in this year’s examination there was no wording or measurement of the FED. The Fed did what it describes as an “explorative analysis” of the private credit market, which came to the conclusion, this analysis was completely separated and not part of this year’s test.
After the 2008 financial crisis, the “stress tests” of the Fed were created to assess whether the “too large” banks of the nation could withstand a different financial crisis, as it once happened almost 20 years ago. The tests are effectively an academic exercise in which the FED simulates a scenario in the global economy and measures what this scenario would do for bank balance.
The 22 banks tested are the biggest names in the shop, such as: JPmorgan ChasePresent CitigroupPresent Bank of AmericaPresent Morgan Stanley And Goldman Sachs, who have hundreds of billions of dollars in assets and have far -reaching companies that affect every part of the United States and the global economy.
As part of this year’s hypothetical scenario, a global global recession would have caused a decline in commercial property prices by 30% and a decrease in real estate prices by 33%. The unemployment rate would increase to 10% and stock prices would drop by 50%. In 2024, the hypothetical scenario was a decline in commercial real estate prices by 40%, a decline in share prices by 55%and a decline in real estate prices by 36%.
With their past classes, the large banks are allowed to buy dividends back to shareholders and shares in order to meet investors revenue. These dividend plans will be announced next week.
