US Banks May Lose Up To $501 Billion In Fed’s Stress Test

Thirty of the largest banks operating in the U.S. would see losses of $501 billion in a severe recession, the Federal Reserve said Thursday in announcing stress-test results that it says shows a banking system in better shape than five years ago.

This nine-quarter test — under which banks would face a jobless rate spiking to 11.25% along with a 50% plunge in stock-market values and a 25% downturn in house prices — is designed to forecast the level of capital that banks would retain in a downturn. The $501 billion in losses consists of $316 billion in loan and lease losses and $151 billion in other losses like mortgage repurchases and the expenses of selling real estate.

A less severe downturn would result in losses among those banks of $355 billion, the Fed said.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu