NEW YORK — All the major banks passed the Federal Reserve’s annual “stress tests” of the financial system, the central bank said Friday, but the test conducted by the central bank was notably less vigorous than it had been in previous years.
All 22 banks tested this year would have remained solvent and above the minimum thresholds to continue to operate, the Fed said, despite absorbing roughly $550 billion in theoretical losses. In the Fed’s scenario, there would be less of a rise in unemployment, less of a severe economic contraction, less of a drop in commercial real estate prices, less of a drop in housing prices, among other metrics compared to what they tested in 2024.
All of these less harmful, but simulated, drops mean there would be less damage to these banks’ balance sheets and less risk of these banks of potentially failing. Since the banks passed the 2024 tests, it was expected that the banks would pass the 2025 tests.
“Large banks remain well capitalized and resilient to a range of severe outcomes,” said Michelle Bowman, the bank’s vice chair for supervision, in a statement. An appointee of President Trump, Bowman became the Fed’s vice chair of supervision earlier this month.
It’s not clear why the Fed chose to go with a less vigorous test this year. In a statement, the bank said previous tests had shown “unintended volatility” in the results and it plans to seek public and industry comment to adjust