The Federal Reserve released the results of its 2024 annual stress tests on 26 June 2024, concluding that all 31 large banks subject to the exercise remained above their minimum capital requirements even under a severely adverse macroeconomic scenario. Collectively, the institutions demonstrated the capacity to absorb nearly $685 billion in hypothetical losses while continuing to meet regulatory capital thresholds, the Fed said in its published results.
The severely adverse scenario used for the 2024 exercise assumed a peak unemployment rate of 10%, a 40% decline in commercial real estate prices, and a 55% fall in equity prices.
RESULTS
All 31 institutions tested — which include the largest systemically important banks operating in the United States — maintained capital ratios above the regulatory minimums throughout the scenario horizon. The Fed noted that the aggregate results demonstrated the resilience of the sector as a whole, while individual bank performance varied depending on business model and portfolio composition.
RESULTS INFORM CAPITAL BUFFER REQUIREMENTS
The stress test outcomes feed directly into each bank's stress capital buffer requirement, which is set annually by the Federal Reserve and becomes effective from 1 October each year. The stress capital buffer is additive to minimum common equity tier 1 capital requirements and is calibrated to the maximum projected decline in each bank's capital ratio under the severe stress scenario.
Banks that post larger peak-to-trough capital declines in the stress model face higher stress capital buffer requirements from October.
The Federal Reserve conducts these exercises annually under authority granted by the Dodd-Frank Act.