The nation’s 31 largest banks stand to shed close to half a trillion dollars if the economy slumped into a deep depression, the Federal Reserve said Thursday. But the banks — which include Citigroup, JPMorgan Chase, Wells Fargo and Goldman Sachs — appear better positioned than ever to handle such loss, Fed data show.
Indeed, for the first time since the Fed began conducting its “stress tests” on banks with more than $50 billion in assets, not one fell below the Fed’s capital requirements, according to the first phase of the Fed’s stress test results released Thursday. That places the nation’s biggest banks in a better position to pass the next phase of the Fed’s stress testing, which will determine which lenders may proceed with plans to return capital to investors. Final grades will be doled out Wednesday.
The Fed said the nation’s 31 largest banks would lose $490 billion in the 27 months ending October 2016 if the economy was rocked by what it called “severely adverse” conditions. Those would include a 10% unemployment rate, a 25% drop in housing prices, a stock market plunge of nearly 60% and “a notable rise in market volatility.”