The Federal Reserve published the results of its 2025 annual stress tests on 27 June 2025, confirming that every participating large United States bank remains adequately capitalised even under a severely adverse economic scenario. The exercise is designed to assess whether the largest banks could continue to lend to households and businesses during a severe recession.
Under the severely adverse scenario, the Federal Reserve projected total hypothetical losses of more than $550 billion across the 22 participating large banks. Despite those projected losses, each institution retained capital ratios above the minimum regulatory requirements throughout the modelled stress horizon.
RESILIENCE UNDER A SEVERE SCENARIO
"Large banks remain well capitalized and resilient to a range of severe outcomes," Vice Chair for Supervision Michelle W. Bowman said. The aggregate decline in the common equity tier 1 capital ratio under the scenario was 1.8 percentage points, smaller than in recent years.
The 2025 scenario featured a severe global recession, with unemployment rising nearly 5.9 percentage points to a peak of 10%, a 30% fall in commercial real estate prices and a 33% fall in house prices. The more than $550 billion in projected aggregate losses is a hypothetical figure derived from those scenario assumptions and does not represent a forecast or expectation of actual losses.
STRESS CAPITAL BUFFER
The results are used to set each large bank's stress capital buffer requirement, which shapes how much capital banks can return through share buybacks and dividends.
The results were published through a press statement on the Federal Reserve's website, and were accompanied by detailed bank-level disclosures covering the modelled trajectories of capital ratios and key financial metrics under the stress scenario.
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