All the main banks brought “stress tests” of the Federal Reserve annually, “the central bank announced on Friday, but the test conducted by the Central Bank was significantly less strong than previous years before previous years.
All 22 banks were tested this year, they remained solvent and above the minimum thresholds to continue acting, said Fed, approximately $ 550 billion in theoretical losses. In the Fed Scenario, there would be less unemployment, less serious economic contraction, less decrease in commercial prices of commercial real estate, between other meters compared to what they tested 2024. Years.
All these less harmful, but simulated, declining, would be less damage to the balance sheet of these banks and fewer risks of these banks potential failure. Since banks transferred tests 2024, banks were expected to pass tests in 2025. years.
“Large banks are still well capitalized and resistant to severe outcomes,” Michelle Bowman said, Vice President of the Bank in the statement. The appointment of President Trump, Bowman became the Vice President of the Feda over the beginning of this month.
Fed said that it went with lesser energy, because the global economy was weakened since last year, so the test strives to weaken. Furthermore, the Bank said that previous tests showed “unintentional volatility” in the results and plans to see the commentary of the public and industry to adapt stress tests in future years. Fed also chose not to test banks as a large extent to their private capital assets, claiming that property property property is usually held in the long run and cannot usually be sold at times of distress.
Fed also has not tested any bank exposure to a private credit class of three trillion property in the amount of three The explorers themselves were noticed to grow rapidly alarmed. The Boston Federal Reserve Bank has recently pointed out that Private loan could be the system risk of financial system Under a serious negative scenario, which is exactly what the stress tests should be tested.
There was no formulation or phrase in a statement of Fed, reports or methodology on examining or credited by private loan or private debt in this year’s test. Fed did what he calls “research analysis of private credit market, which concluded the main banks” General well positioned “to withstand losses on the private credit market. This analysis was completely separated, not part of this year’s test.
Fed “Stress tests” were formed after the financial crisis in 2008. years as a way to measure whether the nation “was too great” could endure another financial crisis as once it happened almost 20 years ago. The tests are effectively academic exercise, where Fed simulates the scenario in the global economy and measures what this scenario would do in bank balances.
22 banks that have been tested are the biggest names in the business, such as JpMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs, who have hundreds of billions of dollars and have a wide deployment of companies that touch every part of the American and global economy.
According to this year’s hypothetical scenario, a large global recession would cause 30% decline in commercial real estate prices and 33% drop in housing prices. The unemployment rate would increase to 10%, and the stock prices would fall 50%. In 2024. year the hypothetical scenario amounted to 40% decline in commercial real estate prices, and 55% decline in falling shares and 36% decline in housing prices.
With their marks, the main banks will be allowed to issue dividends to shareholders and buy stock shares to return to investors. These dividend plans will be posted next week.
