Fed says 32 large banks passed 2026 stress test after projected $708 billion losses
The Federal Reserve said its annual stress test showed 32 large banks could withstand a severe hypothetical recession while staying above minimum common equity tier 1 capital requirements.
The Federal Reserve Board said Tuesday that 32 large banks passed its 2026 stress test and stayed above minimum common equity tier 1 capital requirements even after more than $708 billion in projected losses under a severe recession scenario.
The annual review is used to assess whether major lenders could keep supporting households and businesses in a deep downturn. The board said aggregate capital fell by 1.6 percentage points in the hypothetical scenario, but all 32 banks remained above their required minimums.
What the test assumed
The Fed said the scenario featured a severe global recession. It included a 39% drop in commercial real estate prices, a 30% fall in house prices and unemployment peaking at 10%. The board said economic output would decline as well.
Under those conditions, the 32 banks were projected to absorb roughly $200 billion in credit card losses, about $160 billion in commercial and industrial loan losses and about $75 billion in commercial real estate losses, according to the release.
Why it matters
The Fed said the results suggest large banks are positioned to weather a severe recession and continue lending. The board also said the test results will not change large bank capital requirements, which were published the same day. Current requirements will stay in place until 2027.
In 2027, the Fed said it will run the stress test with loss-estimating models that incorporate public feedback. The board said that step is intended to improve transparency and accountability in the process.
What the Fed said
Vice Chair for Supervision Michelle W. Bowman said the results underscore the strength of the banking system, the release said. She also said public feedback will help improve transparency and accountability in the stress test.
The Fed said the hypothetical scenario was similar in severity to the one used in the prior test. A note in the release said one sentence was updated on July 2, 2026, to remove the word “loan” from “total loan losses.”
What happens next
The current capital requirements remain in place until 2027, when the stress test will use models that reflect public feedback, according to the board.
Sources
Editorial note: This article was prepared with AI assistance and requires editorial review before publication.
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