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All 32 of the nation's biggest banks
clear the Fed's annual 'stress test'
[June 25, 2026]
By KEN SWEET
NEW YORK
(AP) — All 32 of the nation's biggest banks passed the Federal Reserve's
annual “stress test” of the financial system, the central bank said
Wednesday, a sign that the banking system would remain healthy even if a
major economic contraction occurred. |
The William McChesney Martin Jr. building, which houses the Board of
Governors of the Federal Reserve System, is seen on April 7, 2025, in
Washington. (AP Photo/Jacquelyn Martin, File) |
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The
annual stress test measures whether a bank’s capital, a
financial cushion it uses to absorb losses, would remain at
healthy levels even after hundreds of billions of dollars in
projected losses. The tests are required under the Dodd-Frank
Act, the law passed after the 2008 financial crisis that nearly
brought down the global financial system.
The 2026 scenario that the Fed used is similar to the one they
used last year. In the Fed's scenario, unemployment would rise
from 5.5% to 10% and the U.S. economy would contract 4.6%.
Housing prices would fall 30% from their current levels and the
stock market would plunge 58%.
The scenario would result in the nation’s 32 biggest banks
facing $708 billion in loan losses, but the overall capital
ratio of these banks would fall only 1.6 percentage points, from
12.8% to 11.2%. By law and regulation, these large banks' common
equity Tier 1 capital ratio must remain above 4.5%, plus
additional buffers that vary by bank.
The stress test applied only to the nation's most systematically
important banks, those whose failures would bring significant
turmoil to the financial system.
A bank that performed poorly on the stress test could face
higher capital requirements, which could limit its ability to
pay dividends or buy back stock. Banks typically announce their
plans for dividends and share repurchases after the Fed releases
the stress-test results. Shortly after the Fed's announcement,
JPMorgan Chase said it would increase its quarterly dividend to
$1.65 a share from $1.50 a share, and intends to buy back an
additional $50 billion in stock.
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