FRB Stress Tests Show Banks Are "Well Capitalized and Resilient"
The Board of Governors of the Federal Reserve System ("FRB") found that large banks "have sufficient capital to absorb more than $550 billion in losses and continue lending to households and businesses under hypothetical stressful conditions."
In its 2025 Report, the FRB stated that "the aggregate and individual bank post-stress CET1 capital ratios remain above the required minimum regulatory levels throughout the projection horizon." The FRB found that over the past year, "bank profitability improved due largely to robust capital markets activity and sustained strength in net interest margins."
The FRB acknowledged that in this year's stress test, (i) the lower loan losses reflect "a less severe scenario,... due to the mild slowing [of] the U.S. economy [in] 2024 and the countercyclical [nature] of the Board's scenario [design];" and (ii) the lower private equity losses reflect adjustments on how the exposures were measured.
The FRB pointed out that it is currently considering a recent rule proposal that "would require averaging this year’s results with those of the 2024 stress test to calculate each bank’s stress capital buffer requirement." (See previous coverage.)
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The Financial Services Forum, American Bankers Association, Bank Policy Institute and SIFMA urged the Federal Reserve Board to take steps to "clarify the operation of the 2025 stress test cycle and related stress capital buffer requirements to avoid unnecessary uncertainty."
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The Federal Reserve Board proposed "[to] amend the calculation of the Board's stress capital buffer requirement."
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The Board of Governors of the Federal Reserve System released the results of its annual bank stress test. The stress test results demonstrated that all 31 big banks tested had "sufficient capital to absorb nearly $685 billion in losses and continue lending to households and businesses under stressful conditions" while remaining "well above minimum capital requirements."
