The US Federal Reserve (Fed) stated on the 27th that major US banks have ample resources and can continue to provide loans to households and businesses even in the face of a severe economic recession.
All 22 major banks that underwent the Fed's annual “stress test” passed the assessment. The purpose of this test is to evaluate whether they have the ability to weather a severe economic downturn.
Fed Vice Chair for Supervision Bowman said in a statement: “Large banks remain well-capitalized and resilient and are able to withstand a range of severe outcomes.”
The Fed's report stated: “The 2025 stress test results show that the 22 major banks tested this year have sufficient capital to absorb more than $550 billion (about 23,255 billion ringgit) in losses.”
A senior Fed official also pointed out that even after experiencing the forecasted losses mentioned above, these banks' capital levels would still be more than twice the minimum required, indicating strong soundness.
This year's scenario includes a severe global recession, increased stress in commercial and residential real estate markets, as well as the corporate debt market. The hypothetical crisis in the test includes a 30% plunge in commercial real estate prices and a 33% drop in housing prices. In such a scenario, the unemployment rate rises by nearly 5.9% to 10%, and economic output also declines.
The Fed pointed out that, due to the “counter-cyclical design” of the stress test, this year’s scenario is not as severe as last year’s.